Which one of the following statements is the MOST accurate?
A)Departures from PPP are similar in both the short run and long run.
B)Departures from PPP are even greater in the long run than in the long run.
C)Departures from PPP are always greater in the short run than in the long run.
D)It is hard to tell whether departures from PPP are greater in the short run than in the long run.
E)Departures from PPP may often be greater in the short run than in the long run.

Question

Quizplus · Accepted Answer

While departures from PPP can occur in both the short and long run, they may often be greater in the short run because of factors such as changes in exchange rates, inflation, and trade imbalances that can have more immediate effects. However, over time, these factors may be corrected and PPP may hold more closely in the long run. Therefore, E is the most accurate statement.

Which One of the Following Statements Is the MOST Accurate