The Empirical Evidence on Purchasing Power Parity Seems to Point

Multiple Choice

The empirical evidence on purchasing power parity seems to point out that:

A) Purchasing power parity can explain long run movements in exchange rates but does not hold up to scrutiny for short-run changes
B) Purchasing power parity does a good job of explaining short-run movements in exchange rates, but does not hold up to scrutiny over the long run
C) Purchasing power parity is a good theory for international trade, but is of little use in explaining exchange rate movements
D) Inflation and a country's rate of currency appreciation are positively correlated