When PPP does not hold in the short run, economists have developed an alternative short run explanatory theory based on the idea that:
a. currency values are different from other prices, since currencies are not considered assets.
b. currency values are influenced in the short run because they serve as short-term assets.
c. currency values will eventually result in PPP over time, so no short-run theory is needed.
d. currency values are set by government entities and the IMF so the value often does not result in PPP.
Ans: b. currency values are influenced in the short run because they serve as short-term assets.
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Indicate whether the statement is true or false
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