Basket of products consumed each month by the average consumer:
|
Japan |
|
|
Good |
Cost |
|
Fish |
¥55,000 |
|
Textiles |
¥44,000 |
|
Rice |
¥33,000 |
|
Electronics |
¥22,000 |
|
Energy |
¥121,000 |
|
USA |
|
|
Good |
Price |
|
Meat |
$600 |
|
Textiles |
$500 |
|
Wheat |
$100 |
|
Electronics |
$300 |
|
Energy |
$1,000 |
The spot exchange rate is 110 yen (¥) per dollar. Does purchasing power parity (PPP) hold?
At the spot exchange rate of 110 yen per dollar the PPP doesn't hold, as per the PPP the price of the goods should be same in both the nations after taking the exchange rate into account. for PPP to hold the energy expenditure in Yen should be 110,000 but its 121,000, the electronics expenditure should be 33,000 yen but its 22,000 yen only.
Basket of products consumed each month by the average consumer: Japan Good Cost Fish ¥55,000 Textiles...
. Basket of products consumed each month by the average consumer: Japan Good Cost Fish ¥55,000 Textiles ¥44,000 Rice ¥33,000 Electronics ¥22,000 Energy ¥121,000 USA Good Price Meat $600 Textiles $500 Wheat $100 Electronics $300 Energy $1,000 The spot exchange rate is 110 yen (¥) per dollar. Does purchasing power parity (PPP) hold?