If a Basket of Goods Costs 1000 Euros in Europe

question 139

Multiple Choice

If a basket of goods costs 1000 euros in Europe and the Canadian dollar exchange rate is $1.50 = 1 euro,then according to the theory of purchasing power parity,the same basket of goods should cost ________ in Canada.

• A)$150.00
• B)$666.67
• C)$1000.00
• D)$1500.00
• E)$6666.67

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Definitions:

Marginal Propensity

The additional amount that consumers are likely to spend out of an additional unit of income.

Consumption Function

A formula in economics that shows the link between overall consumption and the gross national income.

Price Level

An index that measures the average of prices for goods and services in an economy over a period of time.

Aggregate Expenditure Line

A graphical representation of the total planned spending in an economy at various levels of national income.