Asked by
Verified
The nominal exchange rate is about 2 Aruban florin per dollar. If a basket of goods in the United States costs $50, how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?
A) 52 florin
B) 25 florin
C) 48 florin
D) 100 florin
Nominal Exchange Rate
The exchange rate at which the currency of one nation can be exchanged for the currency of another nation, without considering inflation adjustments.
Purchasing-Power Parity
An economic theory that compares different countries' currencies through a basket of goods approach, to evaluate the relative purchasing power.
Aruban Florin
The currency of Aruba, symbolized as Afl., used within its economic transactions.
- Develop an understanding of the differences and functionalities of nominal and real exchange rates.
- Recognize how exchange rates impact international trade and goods' pricing.
- Understand purchasing-power parity and its exceptions.
Verified Answer
Learning Objectives
- Develop an understanding of the differences and functionalities of nominal and real exchange rates.
- Recognize how exchange rates impact international trade and goods' pricing.
- Understand purchasing-power parity and its exceptions.
Related questions
Other Things the Same, If the Exchange Rate Changes from ...
When Exchange Rates Are Defined as Foreign Currency Per Dollar ...
The Dollar Is Said to Appreciate Against the Euro If ...
Purchasing-Power Parity Theory Does Not Hold at All Times Because ...
If the Price Levels in the United States and in ...