Question

The purchasing power parity condition:
1. is the long-run equilibrium condition for the foreign exchange market
2. is the short-run equilibrium condition for the foreign exchange market
3. tells that the nominal exchange rate equals the ratio of prices of the two countries.
4. tells that the real exchange rate is higher than one.

Answer 1

Answer:

3. Tells that the nominal exchange rate equals the ratio of prices of the two countries