The table shown displays the price-level adjustments for Australia, China, and Mexico as compared to the United States. A person who is earning $20,000 in Mexico would need to earn _______ in the United States to enjoy the same amount of goods and services.

Question

The table shown displays the price-level adjustments for Australia, China, and Mexico as compared to the United States.  A person who is earning $20,000 in Mexico would need to earn _______ in the United States to enjoy the same amount of goods and services.

Quizplus · Accepted Answer

To calculate how much a person earning $20,000 in Mexico would need to earn in the United States, we need to find Mexico's price-level adjustment compared to the United States, which is 0.60. This means that goods and services are 40% cheaper in Mexico compared to the United States.

To adjust for this, we need to divide $20,000 by 0.60, which gives us $33,333.33. However, we want to know how much they would need to earn in the United States to enjoy the same amount of goods and services, so we need to adjust again.

The United States' price-level adjustment compared to itself is 1.00, so there's no adjustment needed. Therefore, the final amount is $33,333.33 divided by 1.10 (the U.S. price-level adjustment compared to Mexico), which equals $30,303.03. Therefore, the answer is A) $30,303.

The Table Shown Displays the Price-Level Adjustments for Australia, China