Question

Which of the following statements is true of purchasing power parity (PPP)?

a. It is the sum of value added by residents and households operating in an economy.
b. It is the management of value-added activities in other countries.
c. It is an investment made by firms within an industry in other countries.
d. It is an adjustment to reflect the differences in cost of living among different countries.

Answer 1

d. It is an adjustment to reflect the differences in cost of living among different countries.

Step-by-step explanation:

Purchasing power parity (PPP) calculates the cost of living, as it determines the value of goods or services, that can be purchased, by different currencies.

As with the purchase of goods or services in different currencies value of money is calculated in each currency, and accordingly it reflects the cost of living among different countries.

Therefore, correct statement is,

Statement d.