A decrease in a fixed exchange rate from 1.75 per pound to 1.60 ...

[karateprodigy]

A decrease in a fixed exchange rate from 1.75 per pound to 1.60 per pound is called a(n) ________ of the pound.
 
  A) devaluation B) depreciation C) revaluation D) appreciation

Question 2

What is PPP and how does it help us to make valid international comparisons of real GDP?
 
  What will be an ideal response?

[T4T]

Answer to Question 1

A

Answer to Question 2

PPP is purchasing power parity. To make the most valid international comparisons of real GDP, we need to value each nation's production using the same prices rather than by using exchange rates and the prices within each country because relative prices within different countries can vary widely. As a result, if the real GDP of each country is valued using the same prices then the comparison of real GDP among the countries is more accurate.