The major things to remember about relative purchasing power parity are:
a. Long-run changes in the value of a nation's currency value depend on the country's inflation rate relative to foreign nations, and short-term exchange rate changes depend mainly on interest parity relationships.
b. The higher a nation's relative inflation, the higher its currency value will be, and long-run changes in the value of a nation's currency value depend mainly on the country's inflation rate relative to foreign nations.
c. The higher a nation's relative inflation, the lower its currency value will be, and long-run changes in the value of a nation's currency value depend on the country's inflation rate relative to foreign nations.
d. Changes in relative international money supplies are the major cause of short-run exchange rate movements, and long-term exchange rate changes depend mainly on interest parity relationships.
e. None of the above
Question 2
Exchange rates should change whenever a nation's:
a. Relative expectations change.
b. Relative income changes.
c. Relative interest rates change.
d. Relative price level changes.
e. All of the above are true.
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