Suppose a Tablet Computer Costs $200 in Australia and 25

question 96

Essay

Suppose a tablet computer costs $200 in Australia and 25 000 in Japan. Suppose the exchange rate is $1 = 100 yen. According to purchasing power parity, what should happen to the exchange rate in the long run? What will be the new exchange rate?
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Definitions:

Production Goods

Items used in the manufacturing process to produce other goods, including raw materials, machinery, and components.

Support Products

Goods and services bought to be used in the production of other products or to facilitate an organization's operations.

Supplies

Materials, goods, or equipment required for the operation of a business or for completing a specific task.

Stationery

Writing materials and office supplies, such as paper, envelopes, and writing instruments, used for personal and business correspondence.