When purchasing power parity holds,it implies that the real exchange rate equal to ________.

Name: When purchasing power parity holds,it implies that the real exchange rate equal to ________.
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Question

Quizplus · Accepted Answer

When purchasing power parity holds, it implies that the real exchange rate is equal to one, which means that the price levels in two countries are equalized, and there is no advantage in trading goods and services between the two countries based on price differences. Therefore, the correct choice is A) 1.

When Purchasing Power Parity Holds,it Implies That the Real Exchange