Multiple Choice
The reason that the law of one price might fail in the short run is that:
A) prices are sticky and the nominal exchange rate is a financial price and adjusts rapidly to new information.
B) prices are flexible and the nominal exchange rate is a financial price that is sticky.
C) both prices and exchange rates are sticky.
D) both prices and the exchange rate react immediately to new information.
E) None of these answers is correct.
Correct Answer:
Verified
Correct Answer:
Verified
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