Use the Following to Answer Questions

question 44

Multiple Choice

Use the following to answer questions:
A car costs $30 000 in Canada and the exchange rate is $1 = £0.50.The same car costs £12 000 in Britain.
-(Scenario: Purchasing Power Parity) Refer To Scenario: Purchasing Power Parity.To have the purchasing power parity,the pound must:

• A) appreciate.
• B) depreciate.
• C) remain constant.
• D) be purchased in foreign exchange markets.

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Definitions:

Consumer Surplus

The distinction between the aggregate amount consumers are inclined and capable of paying for a service or product and what they actually disburse.

Minimum Imposed Price

A price floor set by the government or a regulatory body, below which the price of a good or service cannot fall.

Producer Surplus

The difference between the amount producers are willing and able to supply a good for and the actual amount received by them when the good is sold.

Consumer Surplus

The variance between the price consumers are ready to offer for a good or service and the price they actually incur.