Relative PPP indicates that A) the exchange rate between any ...

[mydiamond]

Relative PPP indicates that
 
  A) the exchange rate between any two currencies is equal to the ratio of their price indexes.
  B) the same good sells for the same price internationally.
  C) the percentage change in the exchange rate is equal to the inflation differential between the domestic and foreign country.
  D) relative prices determine exchange rates.

Question 2

Suppose that a country experiences growth strongly biased toward its export, cloth
 
  A) this will tend to worsen the country's terms of trade.
  B) this will tend to improve the country's terms of trade.
  C) this will tend to leave the country's terms of trade unchanged.
  D) this will tend to worsen the terms of trade for the country's trading partner.
  E) this will increase the price of cloth relative to the imported good.

[debra928]

Answer to Question 1

C

Answer to Question 2

A

[mydiamond]

Gracias!

[upturnedfurball]

Excellent