If the Assumptions for the Theory of Purchasing Power Parity

question 71

Multiple Choice

If the assumptions for the theory of purchasing power parity are correct,then how much does an oil change for a Toyota Prius cost in Japan if the same oil change for the same Toyota Prius costs $29.95 in the United States and the exchange rate is $0.011 per Japanese yen?

• A) This cannot be determined with the given information because oil changes are not tradable.
• B) 2,723 yen
• C) 0.33 yen
• D) 272 yen
• E) 3.29 yen

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Definitions:

Journal Entry

A journal entry is a record of a financial transaction in the accounting system of a business, consisting of debit and credit entries to maintain the double-entry bookkeeping system.

Federal Income Tax

The tax levied by the United States Internal Revenue Service on the annual earnings of individuals, corporations, trusts, and other legal entities.

Dividend Income

Earnings distributed to shareholders from a portion of the company's earnings.

Rental Income

Earnings received from renting out property or equipment, often considered a stable source of income.