Research into the Purchasing Power Parity Theory May Well Identify

Multiple Choice

Research into the purchasing power parity theory may well identify a number of issues relating to the theory.Using your knowledge of the theory,which of the following is correct?

A) The theory is most effective in explaining short-term exchange rate movements.
B) PPP theory incorporates a broad range of variables that act as determinants of an exchange rate.
C) It assumes that residents in a higher-inflation country can easily find product substitutes in another country with lower inflation.
D) All of the given answers are correct.