Asked by
giang quynh
on Dec 17, 2024
Verified
According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?
A) The real exchange rate, but not the nominal exchange rate.
B) The nominal exchange rate, but not the real exchange rate.
C) The real exchange rate and the nominal exchange rate.
D) Neither the real exchange rate nor the nominal exchange rate.
Real Exchange Rate
The rate at which two currencies can be exchanged after adjusting for their respective inflation rates.
Nominal Exchange Rate
The exchange rate at which the currency of one nation can be swapped for that of another.
Price Level
The current average pricing of all economic goods and services across the spectrum.
- Acquire knowledge about the concepts of nominal and real exchange rates.
- Acquire knowledge on purchasing-power parity and its anomalies.
Verified Answer
AM
Learning Objectives
- Acquire knowledge about the concepts of nominal and real exchange rates.
- Acquire knowledge on purchasing-power parity and its anomalies.