According to Purchasing-Power Parity,which of the Following Necessarily Equals the Ratio

question 3

Multiple Choice

According to purchasing-power parity,which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

• A)the real exchange rate,but not the nominal exchange rate
• B)the nominal exchange rate,but not the real exchange rate
• C)the real exchange rate and the nominal exchange rate
• D)neither the real exchange rate nor the nominal exchange rate

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Definitions:

Capital Intensive Techniques

Production processes that require a high investment in capital assets relative to labor.

Regressive Tax

A tax applied uniformly, taking a larger percentage of income from low-income earners than from high-income earners.

Proportional Tax

A taxation structure where the rate of tax stays the same, no matter the taxable amount.

Retail Sales Tax

A tax imposed on the retail price of goods and services paid by the consumer at the point of sale.