Edward lives in England, and he makes a donation of 100,000 ...

[krzymel]

Edward lives in England, and he makes a donation of 100,000 dollars to Food for the Poor, a charitable organization in the United States. Edward's donation will be counted as a(n) ________ in England's current account.
 
  A) export B) factor payment C) transfer payment D) import

Question 2

What is the main shortcoming of the Big Mac Index?
 
  What will be an ideal response?

[GCabra]

Answer to Question 1

C

Answer to Question 2

The Big Mac index is a simple example of a purchasing power parity adjustment. Its shortcoming is that instead of a bundle of diverse goods, this index only compares a bundle consisting of a single good, the Big Mac, which is only a small fraction of people's consumption. Thus, its price will not reflect true cost of living differences across countries.