If the Purchasing-Power Parity Theory Is True, Then

question 96

Multiple Choice

If the purchasing-power parity theory is true, then:

• A) the net exports schedule is very steep.
• B) all changes in the real exchange rate result from changes in price levels.
• C) all changes in the nominal exchange rate result from changes in price levels.
• D) changes in saving or investment influence only the real exchange rate.

---

Definitions:

Predetermined

Established in advance or determined beforehand.

Lump-Sum Amounts

Single payments made for a group of items or services rather than individual transactions.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent and salaries.

Variable Costs

Expenses that fluctuate directly with changes in production or service levels.