The purchasing power parity theory has limitations in forecasting exchange rate fluctuations for all of the following reasons except ?

Related Mcqs:

If a Big Mac hamburger sells for the same dollar value in New York as in London then ?

A. the inflation rate in each country will necessarily equal zero B. the inflation rate in each country will necessarily equal 1 percent C. the exchange rates are said to be fixed pegged to each other D. purchasing power parity holds...

Relatively high real interest rates in the United States tend to ?

A. decrease the foreign demand for dollars causing the dollar to depreciate B. decrease the foreign demand for dollars causing the dollar to appreciate C. increase the foreign demand for dollars causing the dollar to depreciate D. increase the foreign demand for dollars causing the dollar to appreciate...

Suppose that rising U.S income leads to higher sales and profits in the United States This would likely result in ?

A. increasing portfolio investment into the United States B. decreasing portfolio investment into the United States C. increasing direct investment into the United States D. decreasing direct investment into the United States...

Suppose that the purchasing power parity estimate of the dollar/euro exchange rate is $1.30 per euro, and the current spot rate is $1.3 8 per euro. Comparing these two exchange rates from a long-run viewpoint you would ?

A. anticipate the dollar to depreciate against the euro B. anticipate the dollar to appreciate against the euro C. anticipate the dollar’s exchange rate against the euro to remain constant D. have no anticipation concerning future movements in the dollar/euro exchange rate...

For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

A. The United States to Japan causing the dollar to depreciate B. The United States to Japan causing the dollar to appreciate C. The Japan to United States, causing the dollar to depreciate D. The Japan to United States, causing the dollar to appreciate...