Suppose a Given Basket of Goods and Services Costs 9

question 148

Multiple Choice

Suppose a given basket of goods and services costs 9 dollars in the Australia and 5,400 baht in Thailand.If the exchange rate is 600 baht per Australian dollar, purchasing power parity implies that the:

• A)exchange rate has attained its long run equilibrium value.
• B)Australian dollar must appreciate to restore purchasing power parity.
• C)Australian dollar must depreciate to restore purchasing power parity.
• D)baht must depreciate to restore purchasing power parity.

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Definitions:

Plate Tectonics

A theory in which the lithosphere is divided into a number of mostly rigid plates that move relative to one another, causing tectonic activity along these boundaries.

Tectonic Plate

A massive, irregularly shaped slab of solid rock, part of the Earth's lithosphere, which moves and interacts with other plates in a process that shapes the Earth's surface.

Centimeters

A unit of length in the metric system equal to one hundredth of a meter.

Magnetic Stripes

Patterns of alternating magnetic polarity found on the ocean floor parallel to mid-ocean ridges, providing evidence for the theory of plate tectonics and seafloor spreading.