PPP Flashcards
1
Q
what is PPP?
A
purchasing power parity is the measure of the value of currency/exchange rates: how many goods/services can you buy in different countries for the same price?
2
Q
what is a tradeable good?
A
goods that sell for the same price everywhere in the world
3
Q
what is an immovable service?
A
the idea that services cost differently between countries
4
Q
what is the Big Mac Index?
A
converting all Big Mac prices to the $ and comparing prices of different countries
5
Q
what does the Big Mac Index tell you?
A
if a currency is over or undervalued in the foreign exchange markets
6
Q
what is arbitrage?
A
businesses buying goods cheaply in one country, then selling them for more in another country to maximise profits
7
Q
what can PPP tell us?
A
the standards of living in a country
