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Scenario: the Price of a Standard Basket of Goods in Country

Question 90

Multiple Choice

Scenario: The price of a standard basket of goods in Country A is 10 pesos. The price of the same basket of goods in country B is 25 francs and $5 in the United States. Country A has an income per capita of 60,000 pesos, and country B has an income per capita of 100,000 francs. Assume full employment in both countries.
-Refer to the scenario above.Why could it be the case that the standard of living is higher in country B than in country A?


A) The PPP-adjusted GDPs differ from the exchange-rate-adjusted GDPs.
B) The numbers of workers in the two countries are not equal.
C) The exchange rates between pesos and the U.S. dollar and francs and the U.S. $ differ.
D) The composition of GDP per capita is not homogeneous within each country.

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