Use the (hypothetical) information in the following table to answer the following questions.Table 18-2
$\begin{array}{|l|l|c|l|c}
\hline \text { Country } & \text { Currency } & \begin{array}{l}
\text { Currency per } \
\text { U.S. Dollar }
\end{array} & \begin{array}{l}
\text { U.S. Price } \
\text { Index }
\end{array} & \begin{array}{l}
\text { Country Price } \
\text { Index }
\end{array} \
\hline \text { Bolivia } & \text { boloviano } & 8.00 & 200 & 1600 \
\hline \text { Japan } & \text { yen } & 80.00 & 200 & 20,000 \
\hline \text { Morocco } & \text { dinar } & 10.00 & 200 & 2,000 \
\hline \text { Norwegian } & \text { kroner } & 6.5 & 200 & 1,500 \
\hline \text { Thailand } & \text { baht } & 40.00 & 200 & 7,000 \
\hline
\end{array}$

-Refer to Table 18-2. Which currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?
A)boloviano and dinar
B)yen, kroner, and baht
C)yen and kroner
D)baht

Question

Use the (hypothetical) information in the following table to answer the following questions.Table 18-2
 $\begin{array}{|l|l|c|l|c}
\hline \text { Country } & \text { Currency } & \begin{array}{l}
\text { Currency per } \
\text { U.S. Dollar }
\end{array} & \begin{array}{l}
\text { U.S. Price } \
\text { Index }
\end{array} & \begin{array}{l}
\text { Country Price } \
\text { Index }
\end{array} \
\hline \text { Bolivia } & \text { boloviano } & 8.00 & 200 & 1600 \
\hline \text { Japan } & \text { yen } & 80.00 & 200 & 20,000 \
\hline \text { Morocco } & \text { dinar } & 10.00 & 200 & 2,000 \
\hline \text { Norwegian } & \text { kroner } & 6.5 & 200 & 1,500 \
\hline \text { Thailand } & \text { baht } & 40.00 & 200 & 7,000 \
\hline
\end{array}$

-Refer to Table 18-2. Which currency(ies) is(are) more valuable than predicted by the doctrine of purchasing-power parity?
A)boloviano and dinar
B)yen, kroner, and baht
C)yen and kroner
D)baht

Quizplus · Accepted Answer

The doctrine of purchasing-power parity states that the exchange rates should adjust so that the same basket of goods costs the same across countries. In other words, the currency with a lower price index should have a stronger value. Based on the table, both Bolivia and Morocco have lower price indices but their currencies are not more valuable than predicted by purchasing-power parity. On the other hand, Japan, Norway, and Thailand have higher price indices than the US but their currencies are more valuable than predicted by purchasing-power parity. Therefore, the correct choice is B, which includes yen, kroner, and baht. However, the question asks for the best choice(s), which could include C (yen and kroner) if the context specifies that only two currencies are to be selected.

Use the (Hypothetical) Information in the Following Table to Answer