If absolute PPP held,then the real exchange rate must be equal to
A)a constant.
B)one.
C)zero.
D)a positive number.

Question

Quizplus · Accepted Answer

Absolute Purchasing Power Parity (PPP) implies that the purchasing power of two currencies is the same when exchange rate adjustments are made, meaning the real exchange rate equals one. This is because the price levels of the two countries are equalized when expressed in a common currency.

If Absolute PPP Held,then the Real Exchange Rate Must Be