The purchasing power parity for different countries is adjusted (up or

QUESTION

The purchasing power parity for different countries is adjusted (up or down) depending upon whether a country’s cost of living is lower or higher than the cost of living in the United States.

Indicate whether the statement is true or false.

ANSWER

TRUE
To account for differences in the cost of living, one can adjust GNI per capita by purchasing power. The base for the adjustment is the cost of living in the United States. The PPP for different countries is then adjusted (up or down) depending upon whether the cost of living is lower or higher than in the United States.