Multiple Choice
To express the PPP theory in symbols,let P$ be the U.S.dollar price of a basket of particular goods and P¥ be the price of the same basket of goods in Japanese yen.The (purchasing power parity) PPP theory predicts that the dollar/yen exchange rate,E$/¥,should be equivalent to _____.
A) E$/¥= (1+P¥) /P$
B) E$/¥= (1 + P$) /P¥
C) E$/¥= P¥/P$
D) E$/¥= P$/P¥
E) E$/¥= (1+P$) /(1+P¥)
Correct Answer:
Verified
Correct Answer:
Verified
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