Which of the following is incorrect?
A)Exchange rates in the short run are much more variable than inflation differentials.
B)Deviations from PPP are much more apparent for monthly data than annual.
C)PPP holds best in the long run.
D)None of the above.

Question

Quizplus · Accepted Answer

All the statements provided are correct in the context of international finance and economics. Exchange rates do indeed tend to be more variable in the short run compared to inflation differentials. Deviations from Purchasing Power Parity (PPP) are more apparent in shorter time frames like monthly data compared to annual data. Lastly, PPP is generally considered to hold best in the long run, aligning with economic theories and empirical evidence.

Which of the Following Is Incorrect