The predictive accuracy of relative purchasing power parity improves if:
a. Both countries have highly mobile capital markets.
b. Both countries have central bank controls in place so that exchange rates change in an orderly manner.
c. Both countries under consideration have high growth rates.
d. Both countries are either developed or undeveloped (i.e., one is not developed and the other undeveloped).
e. You only are predicting the qualitative change in exchange rates and not the specific exchange rate or quantitative change in the exchange rate.
.E
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Which statement best describes who benefits from basis strengthening over a hedge with a futures contract?
A. Buyers gain, sellers lose B. Buyers lose, sellers gain C. Both gain D. Neither gains or loses since they have offset their basis risk by hedging
Mathematically, the value of the tax multiplier in terms of the marginal propensity to consume (MPC) is given by the formula:
A. MPC ? 1. B. (MPC ? 1) / MPC. C. 1 / MPC. D. 1 ? [1 / (1 ? MPC)].
The open economy effect suggests that
A. a rise in domestic price level will cause domestic residents to buy fewer imported goods. B. a rise in domestic price level will cause foreign residents to buy more domestic goods. C. a decrease in domestic price level will cause foreign residents to buy fewer domestic goods, increasing net exports. D. a decrease in domestic price level will cause foreign residents to buy more domestic goods, increasing net exports.
Which statement is true?
A. Going out of business is a short run option. B. Operating or shutting down are long run options. C. Going out of business or not going out of business are long run options.