Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of U.S.currency must rise if the price level(s)in
A)foreign countries rise.
B)the United States rises.
C)all countries rise.
D)all countries fall.

Question

Quizplus · Accepted Answer

Purchasing-power parity states that the exchange rate between two currencies should adjust to equalize the prices of a basket of goods and services in both countries. Therefore, if the price level in a foreign country rises, the nominal exchange rate must rise to maintain purchasing power parity.

Purchasing-Power Parity Implies That the Nominal Exchange Rate Given as Foreign