Relative price changes:
A) determine exchange rate movements in the long run.
B) can change the exchange rate without changing the price levels.
C) are eliminated by arbitrage.
D) are always more significant than inflation.
E) cannot be empirically calculated.

Question

Quizplus · Accepted Answer

Relative price changes affect the competitiveness of goods and services between countries, influencing exchange rate movements in the long run as they adjust to reflect changes in purchasing power.

Relative Price Changes