When Switching from the "Current Exchange Rate" Method to the "Purchasing

question 50

Multiple Choice

When switching from the "current exchange rate" method to the "purchasing power parity" method,India's standard of living in dollars

• A)decreases.
• B)remains essentially the same.
• C)rises, but still remains far below that of the U.S.
• D)rises almost to the level of the U.S.
• E) leapfrogs over that of the U.S.

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Definitions:

Arbitrage

The practice of profiting from a price difference between two or more markets, transferring a commodity or financial instrument from a lower-priced market to a higher-priced one.

Inelastic Demand

A situation in economics where the change in the price of a good or service has little to no effect on the quantity demanded by consumers.

Total Revenue

The total amount of money a firm receives by selling goods or services.

Substitutes

Goods or services that can be used in place of each other, offering similar benefits to consumers.