2. Assume that the prices of a standard basket of goods and services in different countries...
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2. Assume that the prices of a standard basket of goods and services in different countries are as follows • United States $400 . • Canada C$500 · • United Kingdom £220 • Japan ¥60,000 a. What are the implied PPP exchange rates? b. How would the presence of a high sales tax in Britain, such as the value added tax (VAT), influence your guess of where the actual value of S($/f) would be vis-à-vis the PPP value of S($/£ )? 2. Assume that the prices of a standard basket of goods and services in different countries are as follows • United States $400 . • Canada C$500 · • United Kingdom £220 • Japan ¥60,000 a. What are the implied PPP exchange rates? b. How would the presence of a high sales tax in Britain, such as the value added tax (VAT), influence your guess of where the actual value of S($/f) would be vis-à-vis the PPP value of S($/£ )?
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