--%>
Assignment Help - homework help

Theory of Purchasing Power Parity

Question:

The Theory of Purchasing Power Parity says that, in the long run, nominal exchange rates change to offset changes in relative i. _________________________ so that the purchasing power of two currencies stays roughly at parity.
ii. Briefly Explain?

Answer:

The idea behind PPP theory is that in the long run a good should cost the same price in all the countries, irrespective of the currency. Therefore, the exchange rates change in accordance with the price of a good in a particular economy, so that the actual prices in both the countries are same.

 

   Related Questions in Business Economics

  • Q : Organization identify the reasons for

    identify the reasons for the formation of organizations

    		•
  • Q : Define the Legal forms of businesses

    Define the Legal forms of businesses?

    		•
  • Q : Regulate prices to ensure against

    Not between exact activities for government to undertake, according to Adam Smith, would be for the government to: (1) maintain public institutions and public works. (2) protect society by invasion. (3) serves as a medium for law and justice. (4) regu

    		•
  • Q : Importance of rationally optimal

    Economic scarcity is pervasive, that makes choices essential. Therefore, rationally optimal decisions hinge upon tradeoffs which essentially reflect: (i) cooperation to minimize human greed. (ii) opportunity costs. (iii) competitive social behavior. (

    		•
  • Q : Impact of dollar on aspects of

    Question Discuss the impact of dollar depreciation on the various aspects of American Economy. Devaluation of the DollarIntroduction:

    		•
  • Q : Explain the following from Hull Explain

    Explain the following from Hull, England a news dispatch: “The fish market here slumped today to what local commentators called a ‘disastrous level’—all because of a shortage of potatoes”.

    		•
  • Q : Distribution of endowments 1. We have

    1. We have discussed the importance of resource endowments and institutions for an economy's successful development. a. In this game, what are the resources that make up the endowments, and what defines a given player's endowment o

    		•
  • Q : Raising consumer surplus problem For

    For the question below, utilize the given information. The market for gizmos is competitive, with an increasing sloping supply curve and a downward sloping demand curve. With no govt. intervention, the equilibrium price is $25 and the equilibrium quantity is 10,000 gi

    		•
  • Q : Cchange in demand and a change in the

    Distinguish between a change in demand and a change in the quantity demanded?

    		•
  • Q : If resources were unlimited and freely

    Explain this statement:  “If resources were unlimited and freely available, there would be no subject called economics.”

    		•