If Purchasing Power Parity Holds,then If the Price of a Basket

question 11

Multiple Choice

If purchasing power parity holds,then if the price of a basket of goods in the U.S.rose from $1,500 to $2,000 and the price of the same basket in Mexico rose from 12,000 pesos to 18,000 pesos

• A)inflation was higher in the U.S.than Mexico so the U.S.dollar would appreciate.
• B)inflation was higher in the U.S.than Mexico so the U.S.dollar would depreciate.
• C)inflation was lower in the U.S.than Mexico so the U.S.dollar would appreciate.
• D)inflation was lower in the U.S.than Mexico so the U.S dollar would depreciate.

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Definitions:

Diffusion

The mechanism through which an inventive idea is transmitted over time through selected routes among members of a societal system.

Complex Innovations

Advanced, intricate changes or improvements in processes, products, or systems that often require significant understanding and adaptation.

Diffusion

The method whereby a new idea is spread via specific pathways over a period among individuals within a social network.

Trialability

Refers to the extent to which an innovation can be tested or experimented with on a limited basis before making a full-scale adoption decision.