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8.6  Comparing GDP Throughout the World

1) The most accurate way to compare standards of living throughout the world is to look at

A) total Gross Domestic Product (GDP).

B) GNP.

C) purchasing power parity.

D) foreign exchange rates.

2) The foreign exchange rate is

A) an adjustment that takes into account differences in the true cost of living across countries.

B) the price of one currency in terms of another.

C) another name for purchasing power parity.

D) part of the circular flow diagram.

3) Comparing GDP across countries is unrealistic unless we make adjustment in exchange rates to take into account differences in the cost of living via

A) real GDP.

B) purchasing power parity.

C) price index.

D) international GDP.

4) Purchasing power parity refers to

A) adjustments in GDP figures to put everything into one common currency for comparison sake.

B) adjustments in exchange rate conversions that take into account differences in inflation rates across countries.

C) adjustments in exchange rate conversions that take into account the differences in true cost of living across countries.

D) calculating real, per capita GDP in dollars.

5) The problem with using foreign exchange rates to convert one country's GDP into dollars is that

A) the values of currencies are not comparable.

B) exchange rates do not reflect differences in inflation rates.

C) not all goods and services are sold on world markets.

D) the dollar has been losing value over the last twenty years.

6) To find the U.S. dollar equivalent of a given amount of Mexican pesos, you would have to know

A) per capita GDP in Mexico.

B) per capita GDP in the United States.

C) per capita GDP in both the United States and Mexico.

D) the foreign exchange rate between dollars and pesos.

7) A purchasing power parity index would help you

A) predict changes in U.S. real GDP.

B) identify those goods and services that are becoming relatively more important in chain-weighted GDP.

C) make international comparisons of living standards.

D) estimate the growth rate of U.S. personal income.

8) The foreign exchange rate

A) is the price of one good or service as compared to a similar good or service.

B) is the same as the price of a product in U.S. dollars.

C) is not relevant when comparing the GDPs of various countries.

D) is the price of one currency in terms of another.

9) Of the following, which country has the highest annual real GDP per capita according to the International Monetary Fund and World Bank?

A) China

B) Italy

C) United States

D) Brazil

10) Purchasing power parity exists when domestic currency

A) maintains a fixed exchange rate with a foreign currency.

B) is not convertible to a foreign currency.

C) buys more goods at home than abroad.

D) buys as many goods abroad as at home.

 

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