Purchasing power parity is the theory that nominal exchange rates are determined:
A)by the forces of supply and demand.
B)by real exchange rates.
C)as necessary to achieve the fundamental value of the exchange rate.
D)as necessary for the law of one price to holD.

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) suggests that exchange rates adjust to equalize the price of identical goods and services in different countries, aligning with the law of one price.

Purchasing Power Parity Is the Theory That Nominal Exchange Rates