Purchasing power parity tells us ________.
A) what a unit of local currency can buy in its home country
B) the value of goods and services that can be purchased with one unit of a country's currency
C) the relative ability of two countries' currencies to buy the same basket of goods in those two countries
D) what a currency can actually buy in real terms

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) is the relative ability of two currencies to buy the same basket of goods in their respective countries. It is used to compare living standards and economic productivity of different countries. PPP takes into account the differences in the cost of living and inflation rates in different countries. Therefore, option C is the correct answer. Option A talks about the purchasing power of a currency in the home country, and option B is about the value of goods and services that can be purchased with one unit of a country's currency, without considering the differences in cost of living and inflation rates. Option D is not a correct answer because it is vague and does not specifically address purchasing power parity.

Purchasing Power Parity Tells Us ________