The relative purchasing-power parity theory is potentially more useful than the absolute purchasing-power parity theory because instead of an unrealistic assumption of no transportation costs or trade obstructions,it simply assumes that there are no changes in these factors.

Question

Quizplus · Accepted Answer

The statement is true. The relative purchasing-power parity theory is a more practical way of measuring exchange rates because it considers fluctuations in the exchange rate due to factors like transportation costs or trade barriers. It assumes that these factors remain constant over time, which is a more realistic assumption compared to the absolute purchasing-power parity theory, which assumes no trade barriers or transportation costs.

The Relative Purchasing-Power Parity Theory Is Potentially More Useful Than