Explain the concept of purchasing power parity
What will be an ideal response?
The purchasing power parity framework is used to convert aggregate incomes into common units. The idea here is to adjust aggregate incomes so that a dollar can purchase the same bundle of commodities in any country. To perform this adjustment, we choose a representative bundle of commodities and calculate what it costs in different countries. Then, using the cost of the bundle in each country relative to its cost in the United States, we obtain a measure of each country's aggregate income in PPP-adjusted U.S. dollars.
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Free riding is primarily a characteristic of pure private goods
Indicate whether the statement is true or false
Liquidity performance an increase in the rate of growth of the money supply cause?
A. Interest rates will fall B. Interest rates will rise C. Nominal wages will fall D. Nominal GDP will stay the same E. Real GDP will fall
A bubble is best defined as a(n)
A. increase in the price of an asset resulting from fundamental causes. B. increase in the price of an asset resulting from factors other than fundamental causes. C. decrease in the price of an asset resulting from fundamental causes. D. decrease in the price of an asset resulting from factors other than fundamental causes.
The change in ________ brought about by a change in real wealth that results from a change in the ________ is the real wealth effect.
A. the money supply; money demand B. aggregate output; level of investment C. taxes; interest rate D. consumption; price level