Asked by Nurul Ainaa on Jun 23, 2024
Verified
The television you want to buy costs $1,419 in Canada. If absolute purchasing power parity exists, the identical television will cost _____ in Germany if the exchange rate is 1 EUR = $1.2026.
A) 1,180 EUR
B) 1,267 EUR
C) 1,667 EUR
D) 1,706 EUR
E) 1,723 EUR
Purchasing Power Parity
An economic theory that states that the exchange rate between two currencies is equal to the ratio of the currencies' respective purchasing powers.
Television
An electronic device used for receiving television broadcasts and displaying visual content.
Exchange Rate
The conversion value of one currency into another.
- Comprehend the concept of purchasing power parity and its effects on exchange rates and inflation levels.
Verified Answer
MP
Maryann PerryJun 24, 2024
Final Answer :
A
Explanation :
To find the cost in Germany, divide the cost in Canada by the exchange rate: $1,419 / 1.2026 = approximately 1,180 EUR.
Learning Objectives
- Comprehend the concept of purchasing power parity and its effects on exchange rates and inflation levels.
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