When a currency is described as undervalued, this implies:
A)It is undervalued relative to what the describer believes purchasing power parity to be
B)It is undervalued relative to the exchange rate set by the nation's central bank
C)The exchange rate is greater than one
D)The exchange rate is lower than one year previous

Question

Quizplus · Accepted Answer

When a currency is described as undervalued, it means that its exchange rate is lower relative to what the describer believes purchasing power parity to be. Purchasing power parity is a method of comparing the value of different currencies by looking at the cost of a basket of goods and services in different countries. If a currency is undervalued, it means that it is cheaper than it should be based on this comparison.

When a Currency Is Described as Undervalued, This Implies