Relative purchasing power parity:A) States that identical items should cost the same regardless of the currency used to make the purchase.B) Relates differences in inflation rates to changes in exchange rates.C) Compares the real rate of return to the nominal rate of return.D) Looks at the factors that determine the changes in interest rates.E) Analyzes the changes in inflation rates to determine the cause.

Question

Relative purchasing power parity:A)  States that identical items should cost the same regardless of the currency used to make the purchase.B)  Relates differences in inflation rates to changes in exchange rates.C)  Compares the real rate of return to the nominal rate of return.D)  Looks at the factors that determine the changes in interest rates.E)  Analyzes the changes in inflation rates to determine the cause.

Akshay Mungase · Accepted Answer

Final Answer : B, Explanation :  Relative purchasing power parity (PPP) relates differences in inflation rates to changes in exchange rates, suggesting that the rate at which the price of goods and services increases in one country relative to the rate in another country will be offset by a change in the exchange rate between those countries' currencies.

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