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      Question

      What is true about Purchasing power parity 1)

      A measure of infant mortality in developing countries 2) Metric used by macroeconomic analysts that compares different countries' currencies through a "basket of goods" approach 3) GDP divided by exchange rate
      A Only 1 Correct Answer Incorrect Answer
      B Only 2 Correct Answer Incorrect Answer
      C Only 3 Correct Answer Incorrect Answer
      D 1 and 2 Correct Answer Incorrect Answer
      E 1 , 2 and 3 Correct Answer Incorrect Answer

      Solution

      Solution: Purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that compares different countries' currencies through a "basket of goods" approach. Purchasing power parity (PPP) allows for economists to compare economic productivity and standards of living between countries. Some countries adjust their gross domestic product (GDP) figures to reflect PPP. two currencies are in equilibrium—known as the currencies being at par—when a basket of goods is priced the same in both countries, taking into account the exchange rates.

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