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1 year ago

If purchasing power parity holds, when a country's central bank decreases the money supply, its:_____.

1 answer:

8 0

If purchasing power parity holds, when a country's central bank decreases the money supply, its If purchasing power parity holds, when a country's central bank decreases the money supply, its price level (rises/falls) and its currency (appreciates/depreciates) relative to other currencies in the world.

A theory of exchange rate determination and a means to compare average prices of goods and services between nations is purchasing power parity (PPP).

According to the hypothesis, fluctuations in the spot exchange rate are caused by importers' and exporters' actions, which are prompted by variations in prices across nations.

Alternatively, PPP contends that changes to a nation's current account may have an impact on the value of the currency's exchange rate on the foreign exchange (Forex) market.

In contrast, the interest rate parity theory postulates that fluctuations in the exchange rate are caused by investor actions (whose transactions are reported on the capital account).

The "law of one price" as it pertains to the overall economy is the foundation of PPP theory.

Hence, option A and D is correct.

To learn more about PPP here

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2 years ago

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2 years ago

The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many

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= Price of statue * Foreign Currency Cost of one unit

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3 years ago

On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was increased for t

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Answer:

Increase Rent Expense, $4,000; decrease Prepaid Rent, $4,000.

Explanation:

Since Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1, we will calculate monthly rent amount by:

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3 years ago

Bethea Financial Services had a debit balance of $32,217 in their Fair Value Adjustment account on December 31, 2020. Based on t

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Answer:

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Explanation:

Given:

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According to Fair Value Adjustment account , Debit balance is lower than Credit balance, So they should Debit (Fair Value Adjustment account)

Debit amount = Net unrealized gain - Fair Value Adjustment account

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Debit amount = $14,181

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3 years ago