Suppose the Exchange Rate Is 5 Units of Peruvian Currency

question 206

Multiple Choice

Suppose the exchange rate is 5 units of Peruvian currency per dollar, and a hotel room in Lima, Peru, costs 450 units of Peruvian currency. How many dollars do you need to get a room in Lima?

• A) $45
• B) $90
• C) $455
• D) $2250

---

Definitions:

Income Groups

Categories of individuals or households segmented by income levels, often used for statistical analysis and policy design.

Proportional Tax

At the individual level, a tax whose average tax rate remains constant as the taxpayer’s income increases or decreases. At the national level, a tax for which the average tax rate (= tax revenue/GDP) remains constant as GDP rises or falls.

Benefits-received Principle

The concept that the amount of taxes an individual pays should be directly proportional to the level of benefits or services they receive from the government.

Ability-to-pay Principle

A taxation principle suggesting that taxes should be levied according to an individual's or entity's ability to pay, typically measured by income or wealth.