Question

Suppose you are comparing the income per capita in the United States and Ghana. You try two approaches. In the first​ approach, you convert the Ghana values into U.S. dollars using the current exchange rate between the U.S. dollar and the Ghanaian cedi. In the second​ approach, you also convert both values to U.S. dollars using the purchasing power​ parity-adjusted exchange rate. Which approach is likely to give you a more accurate picture of the living standards in both​ countries?

A. The second​ approach, because​ it's the total dollars that matter.B. The first​ approach, because​ it's the total dollars that matter.C. The second​ approach, because it takes into account the relative costs for each country.D. The first​ approach, because the United States is the​ world's leader and the dollar is the global reserve currency.

Answer 1

B) The first​ approach, because​ it's the total dollars that matter

Step-by-step explanation:

you are comparing the income per capita so what matters is the nominal amount. You are not comparing standards of living nor competitiveness nor any real (not-nominal) value.

A. The statement is false, if you use purchasing power​ parity-adjusted exchange rate, you are note comparing "total dollars"

C. The statement is true, but usefull for another type of analysis

D. The statement is true, and would answer why would you convert Ghananian cedi to US Dollar and not the other way around