Question

Question 5. Use this table to answer part (a) of question 5. Please answer both parts of this question which appear below the table. Table A

Country	Currency	Currency per Canadian Dollar	Canadian Price Index	Country Price Index
Bolivia	Boliviano	8.00	100	700
Japan	Yen	125.00	100	25,000
Morocco	Dinar	10.00	100	1200
Norway	Kroner	6.5	100	650
Thailand	Baht	40.00	100	4000

a. Do all of the currency values in this table (Table A) satisfy the predictions of purchasing power parity? If not, which ones are over-valued, and which ones are under-valued? b. Do you think Purchasing Power Parity is a reasonable prediction for all goods? That is, when might PPP a good job of predicting prices, and what might prevent it from doing a good job of predicting prices.

Answer 1