If the Purchasing-Power Parity Theory Is True, Then

question 96

Multiple Choice

If the purchasing-power parity theory is true, then:

• A) the net exports schedule is very steep.
• B) all changes in the real exchange rate result from changes in price levels.
• C) all changes in the nominal exchange rate result from changes in price levels.
• D) changes in saving or investment influence only the real exchange rate.

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