For which of the following countries is the divergence between GNP per capita measured at official exchange rates and at purchasing power parity (PPP)likely to be largest?

Question

Quizplus · Accepted Answer

The divergence between GNP per capita measured at official exchange rates and at purchasing power parity (PPP) is likely to be largest for countries with low income and low levels of economic development, such as Ethiopia. This is because official exchange rates tend to overvalue the currency of such countries, thereby exaggerating their GNP per capita compared to what it would be at PPP. In contrast, for countries like Japan and the United States, which have higher levels of economic development and stronger currencies, the divergence is likely to be smaller. Brazil falls somewhere in between the two, but is still closer to the higher-income countries than to Ethiopia in terms of economic development.

For Which of the Following Countries Is the Divergence Between