Which country was the price of the basket of goods higher

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Reference no: EM133456417

Assignment:

Directions: For the following activity, you will be using the website

This website provides current information on world living conditions in countries around the world.

Answer the following questions

Select a country whose prices you will be comparing to Canada.
Make a "basket" of 5 items. Try to choose items that are available in both countries (or at least ones that are similar). Record the prices in each country's currency, and find the total of the basket in each country's currency.
Record the prices in Canadian dollars as well.
Calculate the implied purchasing power parity:
Value of the foreign basket in foreign dollars
Value of the Canadian basket in Canadian dollars
Compare the purchasing power parity to the current exchange rate. Recall that for purchasing power parity to exist, the exchange rate and the purchasing power parity ratio must be equal.
Analyze your data and reflect on your findings.
In which country was the price of the basket of goods higher? If there was disparity, what factors do you think might have caused it?

Here is an example

The price of a Coke in Canada was $1.99 CAD.
The price of a Coke in Germany was €2.08.
The implied PPP was 2.08/1.99 = 1.0
The actual exchange rate was $1 = €0.67

Reference no: EM133456417

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