. 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?
NO, as per the PPP same goods in both the market should be having the same price, so energy in Japan should be 1000 x 110 = 110,000 and electronics should be 33,000 and so on. the PPP doesn't hold here,
. 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?