Floating exchange rates
A) systematically lead to much larger but less frequent short-run deviations from the absolute PPP.
B) systematically lead to much larger and more frequent short-run deviations from the relative PPP.
C) systematically lead to much smaller and less frequent short-run deviations from the relative PPP.
D) systematically lead to much smaller but more frequent short-run deviations from the relative PPP.
E) systematically lead to much smaller and less frequent short-run deviations from the absolute PPP.

Question

Quizplus · Accepted Answer

Floating exchange rates tend to result in larger and more frequent short-run deviations from the relative Purchasing Power Parity (PPP) due to market fluctuations and speculative trading.

Floating Exchange Rates