The reason relative purchasing power parity (RPPP) is better at predicting exchange rates than absolute purchasing power parity (APPP) is because:
a. Actually, it is the other way around. APPP has been shown empirically and theoretically to be a more accurate way to predict exchange rates.
b. APPP deals only with countries that have some sort of imbalance like hyperinflation. RPPP deals with any and all countries, which makes the job of predicting exchange rates easier.
c. APPP has to begin and end in parity. RPPP just requires that the initial disequilibrium remain the same.
d. APPP predictions are often biased because of central bank controls, sticky prices, and protectionism. RPPP can abstract from these problems.
.C
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In the circular flow model, which of the following flows in the opposite direction from the flow of factors of production?
A) finished goods and services B) wages, rent, interest, and profit C) interests payments of Federal, state, and local governments D) firm's profit incentives E) the goods market
If real extraction costs do not change, the relative price of a finite resource would be expected to
a. fall over time. b. remain constant over time. c. rise at a rate given by the nominal rate of interest. d. rise at a rate given by the real rate of interest.
Game theory is an especially useful model for analysis in the following types of markets:
a. perfect competition. b. monopolistic competition. c. oligopoly. d. monopoly.
Which is the most accurate statement?
A. Doctors' incomes are high because the demand for their services is high relative to the supply. B. Doctors' incomes are high because the supply of their services is high relative to the demand. C. Doctors' incomes are low because the demand for their services is high relative to the supply. D. Doctors' incomes are low because the supply of their services is high relative to the demand.