Multiple Choice
If purchasing power parity holds,then if the price of a basket of goods in the U.S.rose from $1.000 to $1,200 and the price of the same basket in Poland rose from 6,400 Polish zloty to 8,000 zloty,then
A) the nominal exchange rate would be unchanged and the real exchange rate would appreciate.
B) the U.S.dollar would appreciate and the real exchange rate would stay the same.
C) the nominal exchange rate would be unchanged and the real exchange rate would depreciate.
D) the U.S.dollar would depreciate and the real exchange rate would be unchanged.
Correct Answer:
Verified
Correct Answer:
Verified
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