Which of the following is true regarding the use of purchasing power parity (PPP)? (Check all that apply) A. It is difficult to decide which country's prices to use when making comparisons B. Goods are not Identical across countries so giving them the same price may bias the outcome. C. Adjusting for PPP usually adds very little new information since most countries have exchange rates that do not vary over time. D. There is a larger impact from PPP adjustments when comparing rich to poor nations than comparing rich to rich.

Which of the following is true regarding the use of purchasing power parity (PPP)? (Check all that apply) A. It is difficult to decide which country's prices to use when making comparisons B. Goods are not Identical across countries so giving them the same price may bias the outcome. C. Adjusting for PPP usually adds very little new information since most countries have exchange rates that do not vary over time. D. There is a larger impact from PPP adjustments when comparing rich to poor nations than comparing rich to rich.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter34: International Finance

Section: Chapter Questions

Problem 5QP

See similar textbooks

Similar questions

Hi, I need help with this part 2 of this Macroeconomics question. Thank you.
Question 10 Consider the following table which shows a hypothetical case of India and the US. Both countries produce only wheat and haircuts. Indian prices are in Rupees (Rs). US prices are in dollars ($). Exchange rate between the US $ and Indian Rs is: $1 - Rs 50. What is the official/market based value of per capita GDP of India in dollars? Per Capita Output of Wheat Haircuts Units Indian Units US Price Produced Price per produced per unit In India unit (Rs) in the US ($) 100 400 100 100 400 10 100 10 O $1400 Ⓒ $280 O $14000 O None of the above or not enough information. Question 11 Consider the question above. What is the PPP adjusted per capita GDP of India in US dollars? O $1400 O $280 O $14000 O None of the above or not enough information.
Hi, Please help me with this Macroeconomics question. Thank you.
Pick a good that is bought and sold internationally...the only condition is that you can find the price in the United States and the foreign price online (e.g., the iPhone sold in Mexico versus the United States). Next, find the foreign price, domestic price, and the exchange rate before "testing" the degree to which purchasing power parity holds. Elaborate upon why PPP might better hold for certain goods for certain countries, but not for others? In other words, if we observe major departures from PPP, what might be the cause?
We saw in class that PPP conversion factors are different from market exchange rates because they are based on the actual purchasing powers of currencies. The table below shows the GDP of different countries in their local currency along with their GDP at the market exchange rate, population, and the PPP conversion factor. country GDP in 2017 GDP (US$s, at market ex.) PPP factor роpulation Japan 544¥ trillion $4.86 trillion 105 ¥/$ 127.5 million India 1717 trillion $2.65 trillion 20 7/$ 1339 million |Мexico 22 trillion pesos $1.16 trillion 11 pesos/$ 129 million Which country has the higher GDP per capita measured in purchasing power, India or Mexico? Mexico's average income is more than double India's India's average income is more than double Mexico's Mexico and India have similar average incomes not enough information is provided
The diagram to the right most likely shows the impact on the Canadian economy of A. an increase in the worldwide demand for petroleum products, a major Canadian export good. B. changes in world tastes in favour of Canadian goods. C. a decrease in foreign incomes. D. an outbreak of inflation outside of Canada. If the Bank of Canada makes no transactions in the foreign-exchange market, the Canadian dollar will undergo a depreciation. Use the three-point curve drawing tool to show how a flexible exchange rate serves as a "shock absorber" to the external shock depicted in the accompanying graph. Carefully follow the instructions above, and only draw the required objects. …………. Price Level (P) FO Real GDP (Y) ASO AD1 ADO Q
The graph represents a foreign exchange market and shows the supply and demand for Median Earth's currency, the shilling. The price of a shilling is stated in terms of Normandy's currency, the doubloon. The horizontal axis shows the quantity of shillings that are desired and offered for exchange. The exchange rate in doubloons per shilling is measured on the vertical axis. Answer the questions based on the graph.
Economics The United States and Brazil each produce only cheese and wine. Domestic prices are given in the following table: a,b,were answered in a previous question if you need to review. However, C and D below were left off (c) At an exchange rate of $1 = 2/3 BRL, what is the terms of trade? Who benefits from trade? (d) At an exchange rate of $1 = 1BRL, who benefits from trade? Brazil U.S. cheese per pound4 BRL$6.5 7 BRL$9 wine per bottle
QUESTION 1 The price of a good is $5.56 in the USA and £4.42 in Britain and the exchange rate is £0.98. If you purchase a good from the UK, then how many goods from the US do you forgo purchasing? (Round to the nearest hundredth.) QUESTION 2 The price of oil is $5.83 in the USA and £4.73 in Britain and the exchange rate is £0.85. You have an oil budget of $39 and want to buy as much oil as possible. What is the maximum amount of oil you can afford? (Round to the nearest hundredth.)
The table below shows the labor hours required to produce two goods in two countries. You might think of the units as dozens of loaves and cases of wine. Country bread 60 80 wine 30 60 (a) Which country has the comparative advantage in each good? Explain briefly. (b) If the two countries were both to benefit from trade, what's the possible range of the exchange rate, expressed as units of wine per unit of bread? Explain briefly.
How does the fluctuating value of the Euro affect the price of German cars sold in the United States?
Suppose there is a slowdown in economic activity worldwide and many foreign governments decide to increase government spending to stimulate their economies, what happens to the following? Please indicate whether the following variables rise, fall or remain unchanged. a. World interest rate b. World investment demand c. Domestic investment d. Trade balance of domestic economy e. Real exchange rate of domestic economy