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.Which of the following statements has to be true if we plot the relationship between income per capita (x-axis)and the Human Development Index (y-axis)?
A) Country A lies above and to the right of Country B
B) Country A lies to the right of Country B
C) Country A lies below and to the left of Country B
D) Country A lies above country B

Question

Quizplus · Accepted Answer

Country A has a higher income per capita when adjusted for purchasing power parity (PPP) because the cost of the basket of goods is lower in pesos compared to francs, suggesting that Country A would lie to the right of Country B on the graph.

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