When PPP Holds, the Balassa-Samuelson Forecast Is

question 121

Multiple Choice

When PPP holds, the Balassa-Samuelson forecast is:

• A) very useful in predicting real and nominal exchange rate changes.
• B) somewhat useful except that traders are often unpredictable.
• C) not useful because when PPP holds, the real exchange rate is equal to 1.
• D) used only for comparisons between low-income nations.

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