Transactions costs prevent purchasing power parity from holding because:
A. they make creating exchanges too costly in some places.
B. they include the expense of transporting the goods to be sold in another country.
C. the price of a good sold in another country must include the cost of getting it there, which can be high and cause a large price differential.
D. All of these statements are true.
Answer: D
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Macroeconomics Chapter 8
- According to the table shown, if Bob is earning $30,000 in the United States and Bill is earning $40,000 in Mexico, what can be said about their standards of living?
- According to the information in the table shown, if someone were earning $50,000 in Australia, approximately what would she need to earn in the United States to enjoy the same standard of living?
- According to the information in the table shown, if someone were earning $30,000 in the United States, approximately what would they have to earn in China to have the same standard of living?
- According to the information in the table shown, if someone were earning $20,000 in Mexico, approximately what would he need to earn in the United States to enjoy the same amount of goods and services?
- The information in the table shown:
- According to the information in the table shown, if someone were to make $35,000, she would be able to buy more goods and services if she lived in:
- According to the information given in the table shown, if someone makes $40,000 in the U.S., what would his salary need to be in Mexico to maintain the same standard of living?
- Making international comparisons of purchasing power:
- PPP-adjustment:
- PPP-adjustment involves:
- The ICP index:
- The index used for international price comparisons is the:
- The Big Mac index compares:
- The Big Mac index:
- Comparing the cost of the same basket of goods in different locations:
- An example of a nontradable good is:
- An example of a nontradable good is:
- An example of a nontradable good is:
- Nontradables are cited as a reason why purchasing power parity doesn't hold because:
- Trade restrictions can prevent purchasing power parity from holding because:
- Nontradables:
- Trade restrictions:
- Transactions costs are:
- The idea of purchasing power parity:
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