Suppose the exchange rate for 1 euro is $1.40. Purchasing power parity exists if a fast-food meal in the United States costs $5 and in Paris, that same fast-food meal costs:
a) 2.59 euros.
b) 3.43 euros.
c) 3.57 euros.
d) 7 euros.
Ans: c) 3.57 euros.
You might also like to view...
A baker can produce two products: cupcakes and pies. The table below is the baker's production possibilities schedule:Production Possibilities ScheduleProductABCDEFCupcakes01220365681Pies1086420A change from combination C to B means that
A. 8 cupcakes were given up to make 2 pies. B. 2 pies were given up to make 20 cupcakes. C. 8 cupcakes were given up to make 1 pie. D. 6 pies were given up to make 20 cupcakes.
How is it possible for consumption expenditure to be positive even when disposable income is zero?
What will be an ideal response?
Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are true for the first country?
i. It enjoys gains from trade. ii. It must have an absolute advantage in the production of the good it produces. iii. It is producing at a point beyond its PPF. A) ii and iii B) i and iii C) i, ii, and iii D) i only E) i and ii
"The price of compact fluorescent light bulbs fell because of improvements in production technology. As a result, the demand for incandescent light bulbs decreased
This caused the price of incandescent light bulbs to fall; as the price of incandescent light bulbs fell the demand for incandescent light bulbs decreased even further." Evaluate this statement. A) The statement is false because the demand for incandescent light bulbs would increase as the price of compact fluorescent light bulbs fell. B) The statement is false because it confuses the law of demand with the law of supply. C) The statement is false. A decrease in the price of compact fluorescent light bulbs would decrease the demand for incandescent light bulbs, but a decrease in the price of incandescent light bulbs would not cause the demand for incandescent light bulbs to decrease. D) The statement is false because compact fluorescent light bulbs producers would not reduce their prices as a result of improvements in technology; doing so would reduce their profits.