Suppose a lobster supper in Maine costs fewer dollars than a Lobster supper in Paris, France. Explain why this is inconsistent with purchasing-power parity and explain why the inconsistency may exist
According to purchasing-power parity, a dollar should buy the same amount of goods everywhere in the world. The inconsistency may exist because lobsters have to be transported to Paris. Price differences can also persist because goods are not perfect substitutes. While eating lobster gazing at the Maine coastline may be a pleasurable experience, eating well-prepared lobster in a fancy French restaurant may be an experience people would be willing to pay more for.
You might also like to view...
A regulated monopoly is a monopoly which can charge any arbitrary price for its product
a. True b. False Indicate whether the statement is true or false
Economic models
a. may be insufficient to make numerical predictions. b. may have untestable conclusions. c. both of these are true. d. neither of these are true.
The first official statement of goals for macroeconomic performance in the United States came with the passage of the
A) Federal Reserve Act of 1913. B) Employment Act of 1946. C) Great Depression Act of 1933. D) Full Employment and Balanced Growth Act of 1978.
The classicals said that recessions are _____ because the economy is _____.
Fill in the blank(s) with the appropriate word(s).