In the presences of purchasing power parity, if one-dollar exchanges for 2 British pounds and if a DVD player costs $400 in the United States then in Britain the DVD player should cost ?
Correct answer: D. 800 pounds
- A. 200 pounds
- B. 400 pounds
- C. 600 pounds
- D. 800 pounds
Explanation
Purchasing power parity applies the exchange rate to the U.S. price: $400 × 2 pounds per dollar = 800 pounds. Therefore, the British price should be 800 pounds.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
A primary reason that explains the appreciation in the value of U.S dollar would be ?
The appreciation in the value of the dollar in the early 1980s is explained by all of the following except ?
If Canada runs a balance of payments surplus and exchange rates are floating ?
Relatively high real interest rates in the United States tend to ?
If a Big Mac hamburger sells for the same dollar value in New York as in London then ?
The relationship between the exchange rate and the prices of tradable goods is known as the ?