Changes in relative prices occur when
A)all prices move together.
B)all exchange rates move together.
C)product prices change at different rates.
D)exchange rate appreciation is greater than price appreciation.

Question

Quizplus · Accepted Answer

Relative prices refer to the prices of different goods or services in comparison to each other. When the prices of these goods or services change at different rates, there are changes in relative prices. A and B are incorrect because they suggest that all prices or exchange rates move together, which is not necessarily the case. D is also incorrect as it assumes that exchange rate appreciation and price appreciation are always linked, which is not necessarily true.

Changes in Relative Prices Occur When