Suppose individuals wish to obtain the most accurate comparison of living standards between the Canada and Saudi Arabia.To do so,one would convert Saudi Arabian output into dollars using
A)the current nominal exchange rate.
B)the current real exchange rate.
C)the prior year's real exchange rate.
D)an average of the last five years' exchange rates.
E) purchasing power parity methods.

Question

Quizplus · Accepted Answer

The purchasing power parity method is the most appropriate for obtaining an accurate comparison between living standards in Canada and Saudi Arabia. This method considers the relative prices of goods and services in each country to account for differences in the cost of living. Using the nominal exchange rate or real exchange rate may not accurately reflect the purchasing power of individuals in each country.

Suppose Individuals Wish to Obtain the Most Accurate Comparison of Living