The PPP theory is most useful in predicting:
A)short-run changes in the exchange rate for a country that mainly produces heavily-traded standardized goods.
B)long-run changes in the exchange rate for a country that mainly produces heavily-traded standardized goods.
C)short-run changes in the exchange rate for a country that mainly produces lightly-traded standardized goods.
D)long-run changes in the exchange rate for a country that mainly produces lightly-traded non-standardized goods.

Question

Quizplus · Accepted Answer

The PPP theory predicts better in the long run than the short run. Also, the theory predicts better for tradable, standardized goods than for other goods and services.

The PPP Theory Is Most Useful in Predicting