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MCQ 23 (E, A)

Suppose the inflation rate over the last 20 years
has been 10 per cent in the UK, 7 per cent in Japan, and 3 per cent in the USA. If purchasing power
parity holds, which of the following statements is true? Over this period,

a.
the value of the dollar should have fallen compared to
the value of the pound and the yen.
b.
none of these
answers
c.
the yen should have fallen in value compared to the
pound and risen compared to the dollar.
d.
the value of the
pound should have risen compared to the value of the yen and the dollar.
e.
the yen should have risen in value compared to the pound and fallen compared
to the dollar.
Which of the following statements is true about a
country with a trade deficit?

a.
Net exports are negative.
b.
Net capital outflow must be positive.
c.
Exports exceed imports.
d.
Net exports are
positive.
e.
none of these
answers
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