question archive A television set sells for $1,000 U
A television set sells for $1,000 U
Subject:FinancePrice:2.87 Bought7
A television set sells for $1,000 U.S. dollars. In the spot market, $1 = 110 Japanese yen. If purchasing power parity holds, what should be the price (in yen) of the same television set in Japan?
A. 80,000 yen
B. 110,000 yen
C. 100,000 yen
D. 120,000 yen
E. 90,000 yen
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Answer:
If purchasing power parity holds the price in Japan would be price in USD times value of 1 dollar in Yen.
Price in Yen = Price in USD x value of 1 USD in Yen
= 1,000 x 110 Yen
= 110,000 Yen
Therefore, option B is correct.
