Asked by Basma Kassab on Sep 24, 2024
Verified
A widget costs $1000 in the US and CAD$1200 in Canada.The current exchange rate is 1USD=1.09CAD.At this rate,
A) The good costs more in the US
B) The good costs more in Canada
C) The good costs the same across the two countries
D) None of the above
Exchange Rate
The value of one currency for the purpose of conversion to another, crucial for international trade and investments.
Widget Costs
An generic term used to discuss the production costs associated with creating a fictional or hypothetical product.
- Employ the concept of Purchasing Power Parity for the comparison of goods' costs in distinct nations.
Verified Answer
LK
Lizzie Kirby4 days ago
Final Answer :
B
Explanation :
At the current exchange rate of 1USD=1.09CAD, the cost of the widget in Canada is CAD$1200. To find the cost of the widget in USD, we can divide CAD$1200 by 1.09:
CAD$1200 / 1.09 = USD$1100.92
Since USD$1000 is less than USD$1100.92, the widget costs more in Canada. Therefore, the correct choice is B: The good costs more in Canada.
CAD$1200 / 1.09 = USD$1100.92
Since USD$1000 is less than USD$1100.92, the widget costs more in Canada. Therefore, the correct choice is B: The good costs more in Canada.
Learning Objectives
- Employ the concept of Purchasing Power Parity for the comparison of goods' costs in distinct nations.