Author Question: Suppose purchasing power parity exists in the car stereo market in the United States and Australia. ... (Read 53 times)

Tazate · **on:** Jun 30, 2018

Suppose purchasing power parity exists in the car stereo market in the United States and Australia. If a car stereo costs 230 in the United States and the exchange rate is 1 = AUD1.67, the same car stereo may be purchased in Australia for approximately:
a. AUD 138.
b. AUD 230.
c. AUD 2,300.
d. AUD 384.
e. AUD 108.

Question 2

If your aunt in Italy lends you 5,000 to complete your American education, this will be entered on the U.S. balance of payments account as a:
a. debit (-).
b. credit (+).
c. non-entry, since it will affect Italy's payments but not those of the United States.
d. devaluation, since the net value of the American capital stock will be reduced by the amount of your debt.