When a currency is described as overvalued, this typically implies:
A) it is overvalued relative to the exchange rate set by the nation's central bank.
B) it is selling at an exchange rate less than one.
C) the exchange rate is higher than one year previous.
D) its current market value is higher than the value that is thought to be consistent with purchasing power parity.

Question

Quizplus · Accepted Answer

When a currency is overvalued, it means its current market value is higher than the value that is consistent with purchasing power parity. Purchasing power parity compares the cost of goods and services in different countries to determine what the exchange rate should be, based on what consumers can buy with a particular currency.

When a Currency Is Described as Overvalued, This Typically Implies