According to Purchasing-Power Parity, If the Dollar Price of Oil

question 88

Multiple Choice

According to purchasing-power parity, if the dollar price of oil is higher in New York than in London, arbitrageurs will ___ oil in New York and _____ oil in London to drive _____ the price of oil in New York.

• A) buy; sell; up
• B) buy; sell; down
• C) sell; buy; up
• D) sell; buy; down

---

Definitions:

Expected Rate

Often refers to the anticipated rate of return on an investment or the expected growth rate of an economic variable.

Risk-Averse Investor

An individual who prefers lower returns with known risks rather than higher returns with unknown risks.

Variances

Variances measure the dispersion of a set of data points around their mean value, identifying how spread out the data points are.

Risky Asset

An investment that has a significant degree of uncertainty regarding its future returns, potentially leading to losses as well as gains.