Which of the Following Is Not True Regarding IRP, PPP

question 57

Multiple Choice

Which of the following is not true regarding IRP, PPP, and the IFE?

• A)IRP suggests that a currency's spot rate will change according to interest rate differentials.
• B)PPP suggests that a currency's spot rate will change according to inflation differentials.
• C)The IFE suggests that a currency's spot rate will change according to interest rate differentials.
• D)All of the above are true.

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Definitions:

Investment Spending

Expenditures on capital goods by businesses and individuals to add to their capital stock, contributing to future production.

Monetary Policy

A set of actions undertaken by a country's central bank or government to control the supply of money and interest rates aiming to achieve macroeconomic goals like control of inflation, full employment, and stable economic growth.

Fiscal Policy

A government's strategy for managing its budget, including taxation and spending decisions, to influence the economy.

Desired Money Holdings

This is the quantity of money individuals prefer to keep available for immediate transactions or precautionary purposes.