Question

In France and Spain, a Big Mac costs 1 euro. Yet the standard of living is...

In France and Spain, a Big Mac costs 1 euro. Yet the standard of living is higher in ________.

A) Spain if a Big Mac is only a small part of people's consumption and Spain's GDP per capita is higher

B) France if its exchange rate is higher

C) Spain if all other goods are cheaper in Spain than in France

D) France if all other goods also cost the same in Spain and France but the GDP per capita is higher in France

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Answer #1

Option D.

  • In France and Spain, a Big Mac costs 1 euro. Yet the standard of living is higher in France if all other goods also cost the same in Spain and France but the GDP per capita is higher in France.
  • GDP per capita refers to the gross domestic output of a nation divided by its population and it is an important indicator of a country's standard of living.
  • If a country's per Capita GDP is higher than any other nation, it means that it has higher standard of living than the other country.
  • Hence, the standard of living of France is higher than Spain even if the prices of their goods seems the same.
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