According to Purchasing-Power Parity,if the Same Basket of Goods Costs

question 25

Multiple Choice

According to purchasing-power parity,if the same basket of goods costs $100 in the U.S.and 50 pounds in Britain,then what is the nominal exchange rate?

• A)2 pounds per dollar
• B)1 pound per dollar
• C)1/2 pound per dollar
• D)None of the above is correct

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Definitions:

Tax Cut

A reduction in the amount of taxes imposed by the government on individuals or businesses, often aimed at stimulating economic growth.

Political Business Cycles

Economic fluctuations that occur when discretionary policy is manipulated for political gain.

Discretionary Policy

This involves government policies, like fiscal and monetary policy decisions, that are deliberately formulated and applied in response to economic conditions to manage aggregate demand.

Economic Fluctuations

Variations in the level of economic activity in a country over a period of time, characterized by periods of boom and recession.