Deviations from Purchasing Power Parity Will Be Increasingly Higher as International

question 54

Multiple Choice

Deviations from purchasing power parity will be increasingly higher as international trade tariffs become more restrictive.The main reason for this phenomenon is that:

• A)arbitrage activities become less profitable.
• B)governments prefer purchasing power parity not to hold.
• C)the interest rate parity fails to hold.
• D)goods become more differentiated across countries.
• E)individuals develop hatred toward closed economies.

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Definitions:

Incremental Cost Approach

A decision-making process that focuses on the changes in total cost that would result from a decision to pursue one alternative over another.

Income Taxes

Taxes charged by the government on earnings generated by businesses and individuals within its jurisdiction.

Net Present Value

A calculation used to estimate the value of an investment, adjusting for its cash inflows and outflows over time and discounting them to the present day.

Post Audit

A review conducted after the completion of a project or period to evaluate its compliance with projected outcomes and objectives.