Which of the following is a limitation of the Purchasing Power Parity (PPP) theory? a It applies only to large economies. b It considers only tradable goods, excluding non-tradable services. c It assumes that exchange rates are solely determined by interest rates. d It states that currencies are always stable and predictable.
Which of the following is a limitation of the Purchasing Power Parity (PPP) theory? a It applies only to large economies. b It considers only tradable goods, excluding non-tradable services. c It assumes that exchange rates are solely determined by interest rates. d It states that currencies are always stable and predictable.
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter19: International Finance And The Foreign Exchange Market
Section: Chapter Questions
Problem 14CQ
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Which of the following is a limitation of the Purchasing Power Parity (PPP) theory?
a It applies only to large economies.
b It considers only tradable goods, excluding non-tradable services.
c It assumes that exchange rates are solely determined by interest rates.
d It states that currencies are always stable and predictable.
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