When EP /P rises A) IM will rise. B) IM will fall. C) IM may ...

[karen]

When EP /P rises
 
  A) IM will rise.
  B) IM will fall.
  C) IM may rise or fall.
  D) IM is not affected.
  E) IM and P will both rise.

Question 2

Why is it true that exchange rates tend to be equal worldwide? Briefly explain.
 
  What will be an ideal response?

[Briannahope]

Answer to Question 1

C

Answer to Question 2

Explain that arbitrage would result in equal exchange rates, and end when transactions costs are equal to the difference in exchange rates.

[karen]

Thanks for the timely response, appreciate it

[laurnthompson]

Excellent