Purchasing Power Parity Does Not Hold in the Short to Medium

question 94

Multiple Choice

Purchasing power parity does not hold in the short to medium run because

• A)exports don't equal imports.
• B)exchange rates fluctuate too much.
• C)most business cycles are caused by shocks to aggregate demand.
• D)countries produce different goods.

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Definitions:

Surety

A financial guarantee by one party (the surety) to assume responsibility for the debt obligation of a borrower if that borrower defaults.

Principal Debtor

The primary individual or entity responsible for fulfilling the obligations of a debt or loan agreement.

Surety

A financial arrangement where a third party (surety) agrees to assume responsibility for the debt or obligation of another party if that party fails to meet their obligations.

Consideration

The value (such as money, services, or goods) promised in a contract which motivates a party to enter into the agreement.