The Figure Given Below Depicts the Foreign Exchange Market for British

question 56

Multiple Choice

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Suppose purchasing power parity exists in the car stereo market in the United States and Australia. If a car stereo costs $230 in the United States and the exchange rate is $1 = $AUD1.67, the same car stereo may be purchased in Australia for approximately:

• A)$AUD 138.
• B)$AUD 230.
• C)$AUD 2,300.
• D)$AUD 384.
• E)$AUD 108.

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Definitions:

Utility-Maximizing

The economic principle where individuals or firms make choices that lead to the highest level of satisfaction or profit.

Satisfaction

The fulfillment or gratification of a need, desire, or appetite, often used in the context of consumer experiences with goods or services.

Demand Curve

A visual depiction showing how the quantity of a product demanded by buyers varies with its price.

Horizontal Summation

A method used to determine the total market demand or supply by adding together the quantities demanded or supplied at each price by all individuals.