MCQ3. Purchasing Power Parity is only an effective measure of differences in inc

Question

MCQ3. Purchasing Power Parity is only an effective measure of differences in income between two countries when the representative good or basket contains many services as compared to goods. compares the cost of a representative good (like the Big Mac) across different countries to compare income between these two countries. a. b. is only an effective measure of differences in income between two countries when the representative good or basket contains only goods, and goods that can not be easily transferred between countries. is only an effective measure of differences in income between two countries when the representative good or basket contains goods and services that can not be easily transferred between countries. compares the cost of a representative basket of goods and services across different countries to compare income between these two countries. c. d. e.

Explanation / Answer

Ans

E is right. Note non traded goods are not included in the ppp calculations. It involves both goods and services

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