The Nominal Exchange Rate Is About 2 Aruban Florin Per

question 37

Multiple Choice

The nominal exchange rate is about 2 Aruban florin per dollar.If a basket of goods in the United States costs $40,how many florins must a basket of goods in Aruba cost for purchasing-power parity to hold?

• A)20 florin
• B)40 florin
• C)60 florin
• D)80 florin

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Definitions:

Budget Line

A visual chart showing every potential mix of two products that one can buy with a specific amount of money at constant prices.

Goods

Tangible items that satisfy human wants or needs, and that can be transferred from one person to another.

Income

The income earned, particularly consistently, from employment or investment returns.

Ordinal Utility

A concept in economics that describes how consumers rank different bundles of goods, reflecting preferences in terms of order rather than quantifiable satisfaction.