Multiple Choice
If the theory of purchasing power parity is correct,which of the following statements should be true in the long run?
A) The percentage change in the nominal exchange rate equals the foreign inflation rate minus the domestic inflation rate.
B) The percentage change in the real exchange rate equals the foreign inflation rate plus the domestic inflation rate.
C) The percentage change in the nominal exchange rate equals the percentage change in the real exchange rate minus the sum of the foreign inflation rate and the domestic inflation rate.
D) The percentage change in the nominal exchange rate equals zero.
Correct Answer:
Verified
Correct Answer:
Verified
Q3: Suppose a Big Mac costs $4.20 in
Q4: If the dollar appreciates relative to the
Q5: <span class="ql-formula" data-value="\quad "><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mspace
Q6: If the nominal exchange rate between the
Q7: Figure 5.3<br> <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB4177/.jpg" alt="Figure 5.3
Q9: One disadvantage of a fixed exchange rate
Q10: Which of the following is an example
Q11: Purchasing power parity does a _ job
Q12: One advantage of a floating exchange rate
Q13: <span class="ql-formula" data-value="\quad "><span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mspace