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11) Assume that a GM car sells for $20,000 in the United States and that the exchange rate is $1 = 1.3 euros. For purchasing power parity to hold, the same car in Italy should sell for

A) 20,000 euros.

B) 15,385 euros.

C) 26,000 euros.

D) 16,542 euros.

12) How many U.S. dollars does a U.S. importer need to pay for an invoice of 1 million yen when the price of 1 yen is $0.006?

A) $1,666 million

B) $1.66 million

C) $166.7

D) $6,000

13) Which of the following allows us to compare average levels of real production per person in different nations in a way that adjusts for differences in true costs of living?

A) nominal GDP based on purchasing power parity

B) per capita real GDP based on purchasing power parity

C) real GDP based on foreign exchange rates

D) per capita nominal GDP based on foreign exchange rates

14) Suppose you know that a certain country with a growing population has experienced steady growth in real per capita GDP.  What do you then also know to be true?

A) The distribution of income in this country has become relatively more equal.

B) The growth in goods and services produced and exchanged in the marketplace has outpaced the growth in population.

C) This country exports more than it imports.

D) This country imports more than it exports.

15) The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is called

A) nominal purchasing power.

B) purchasing power parity.

C) raw purchasing power.

D) currency-adjusted purchasing power.

16) The most meaningful way to compare per capita Gross Domestic Product (GDP) across countries is to

A) use foreign exchange rates to convert each country's per capita Gross Domestic Product (GDP) into dollars. Then compare.

B) first adjust each country's per capita Gross Domestic Product (GDP) to exclude all the goods and services that are not exchanged with other countries.

C) assume that the cost of living in each country is the same as the United States' cost of living.

D) first use purchasing power parity to factor in each country's true cost of living.

17) How can we compare standards of living across countries?

 

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