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Purchasing power parity Quiz 1

Quiz by Jamal Haider Naqvi

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10 questions
Show answers
  • Q1
    Which of the following best describes purchasing power parity (PPP)?
    a measure of government spending in different countries
    a measure of inflation rates in different countries
    a measure of the economic growth of a country
    a measure of the relative purchasing power of different currencies
    60s
  • Q2
    What is the main purpose of using purchasing power parity (PPP)?
    to measure the inflation rates in different countries
    to evaluate the economic growth of a country
    to compare the standard of living between different countries
    to determine exchange rates between different currencies
    60s
  • Q3
    Purchasing power parity (PPP) is based on the principle that:
    the exchange rate between two currencies should equal the ratio of their respective price levels
    the exchange rate is determined solely by the supply and demand of currencies
    the purchasing power of a currency depends on the size of a country's economy
    the inflation rate of a country determines the value of its currency
    60s
  • Q4
    Which of the following is an implication of purchasing power parity (PPP)?
    The exchange rate between two currencies should adjust to offset differences in inflation rates.
    The exchange rate between two currencies is solely determined by supply and demand.
    The purchasing power of a currency depends on the size of a country's economy.
    The exchange rate between two currencies should equal the ratio of their respective price levels.
    60s
  • Q5
    Which factor does purchasing power parity (PPP) take into account when comparing economies?
    The GDP growth rate of a country
    The cost of a basket of goods and services
    The government debt of a country
    The population size of a country
    60s
  • Q6
    Which of the following is a limitation of purchasing power parity (PPP)?
    It doesn't account for currency fluctuations and inflation rates.
    It only considers the cost of goods and services and neglects other factors.
    It assumes that goods and services are equally available and of similar quality across countries.
    It relies solely on exchange rates and ignores price differentials.
    60s
  • Q7

    Given a home country and a foreign country, purchasing power parity (PPP) suggests that:

    a home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate.

    a home currency will appreciate if the current home inflation rate exceeds the current foreign inflation rate.

    a home currency will depreciate if the current home inflation rate exceeds the current foreign inflation rate

    60s
  • Q8

    Assume that the inflation rate in Singapore is 3%, while the inflation rate in the U.S. is 8%. According to PPP, the Singapore dollar should ____ by ____%

    depreciate; 3,11%

    appreciate; approx. 5%

    depreciate; approx. 5%

    60s
  • Q9

    Purchasing power parity(PPP) focuses on the relationship between nominal interest rates and exchange rates between two countries.

    false
    true
    True or False
    45s
  • Q10

    The relative form of purchasing power parity (PPP) accounts for the possibility of market imperfections such as transportation costs, tariffs, and quotas in establishing a relationship between inflation rates and exchange rate changes.

    true
    false
    True or False
    45s

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