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 often tend to be greater in the short run due to factors such as changes in interest rates, speculation, and changes in investor sentiment. In the long run, market forces tend to eliminate these discrepancies, leading to a convergence towards PPP. However, there may still be other factors that prevent complete convergence, leading to some departures even in the long run. Therefore, option E is the most accurate statement.

Which One of the Following Statements Is the Most Accurate