If the exchange rate is equal to the ratio of the domestic and foreign price indexes,
A. absolute PPP holds.
B. relative PPP holds.
C. one currency is said to be overvalued.
D. one currency is said to be undervalued.
Answer:A
If the exchange rate is equal to the ratio of the domestic and foreign price indexes,
A. absolute PPP holds. B. relative PPP holds. C. one currency is said to be overvalued. D. one currency is said to be undervalued.