Which of the Following BEST Describes Purchasing Power Parity

question 33

Multiple Choice

Which of the following BEST describes purchasing power parity?

• A) total quantity of goods and services produced by an economic system
• B) total quantity of goods and services that can be purchased with one paycheck
• C) total quantity of goods and services that could have been purchased if one's pay rose in the same proportion as inflation
• D) the principle that exchange rates are set so that prices of similar products in different countries are about the same
• E) the principle that a market economy determines supply and demand for consumer products

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Definitions:

Utility

In economics, the satisfaction or benefit derived by consuming a product, thus the preference for one product over another.

Market Baskets

A collection of goods and services used to track price changes and economic inflation over time, representing a fixed set of consumer products and services.

Completeness

A principle in consumer theory stating that consumers can rank all possible bundles of goods in terms of preference.

Transitivity

In preferences, it's the principle that if option A is preferred to B, and B is preferred to C, then A should be preferred to C.