The Price of a Basket of Goods Is $2000 in the U.S.If

question 68

Multiple Choice

The price of a basket of goods is $2000 in the U.S.If purchasing-power parity holds,and the dollar buys two units of some country's currency,then how many units of foreign currency does the same basket of goods cost in that country?

• A)4000
• B)2000
• C)1000
• D)None of the above are correct.

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Definitions:

Money Supply

The total financial resources in an economy at a particular time, made up of cash, coins, and the holdings in checking and savings accounts.

Inflation

An increase in the average cost of goods and services, resulting in a drop in the value of purchasing power.

Unemployment Rate

The unemployment rate represents the proportion of the workforce that is without a job and is actively looking for work.

Monetary Neutrality

The theory that changes in the money supply only affect nominal variables (like prices) and not real variables (like output) in the long run.