Evidence Suggests That Convergence to PPP Occurs

question 80

Multiple Choice

Evidence suggests that convergence to PPP occurs:

• A) instantly, as arbitrageurs take advantage of profit opportunities.
• B) rapidly, as arbitrageurs learn of profit opportunities.
• C) slowly, as arbitrageurs operate, and production, prices, and exchange rates adjust.
• D) never.

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Definitions:

Constant Opportunity Cost

A theoretical concept where the opportunity cost of producing a good remains constant as more of the good is produced.

Decrease In Unemployment

A reduction in the number of unemployed individuals in the workforce, often indicating economic growth.

Production Possibilities Frontier

A visual depiction illustrating the highest achievable production combinations of two products or services within an economy, assuming all resources are completely and effectively used.

Shift Outward

An economic term describing the expansion of a country's production possibility frontier, indicating increased capacity to produce goods and services.