According to purchasing power parity,if it took 1,000 Korean Won to buy a dollar this year,but it took 1,100 to buy it last year,then the dollar has
A) appreciated,indicating inflation was higher in the U.S.than in Korea.
B) appreciated indicating inflation was lower in the U.S.than in Korea.
C) depreciated indicating inflation was higher in the U.S.than in Korea.
D) depreciated indicating inflation was lower in the U.S.than in Korea.

Question

Quizplus · Accepted Answer

According to the concept of purchasing power parity, the exchange rate should reflect the relative prices of goods and services between countries. If it took less Korean Won to buy a dollar this year compared to last year, it means that the Korean Won has strengthened in relation to the dollar. Therefore, the dollar has depreciated relative to the Korean Won, indicating that inflation was higher in the U.S. than in Korea.

According to Purchasing Power Parity,if It Took 1,000 Korean Won