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Angelina_Jolie [31]
3 years ago
14

Under purchasing power parity, the future spot exchange rate is a function of the initial spot rate in equilibrium and a. the in

flation differential. b. the forward discount or premium. c. the income differential. d. none of the above
Business
1 answer:
kirza4 [7]3 years ago
6 0

Answer:

The correct answer is a) the inflation differential.

Explanation:

Inflation differential is the difference we can find between two countries in exchange rates. The inflation differential can produce losses for the company if, in the country you want to buy, there is a big difference in your exchange rate, since this raises the prices of the product. As a result, the company has a loss; it can also happen if It is a case of exports.

If the inflation differential is maintained for an extended period, it can cause loss of competitiveness, since the profit margin of the products would be affected.

<em>I hope this information can help you.</em>

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Market failure refers to a situation where there is an inefficient allocation of products and services on the open market. The individual incentives for rational behavior do not result in rational outcomes for the collective in a market failure.

In other words, each person chooses what is best for themselves, but those choices end up being bad for the collective. This can occasionally be demonstrated in conventional microeconomics as a steady-state disequilibrium condition.

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3 0
3 years ago
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