In this question you will compute PPP exchange rates using prices off the internet. We begin by using Amazon’s various country-specific sites.
In this question you will compute PPP exchange rates using prices off the internet. We begin by using Amazon’s various country-specific sites. Begin by choosing an objectt hat is sold in identical (or near-identical) form at both Amazon’s US website as well as another Amazon country site. 1 Denote the US Amazon price of the object you chose by Pus and denote the price of the object on the other Amazon country-specific website as Po (note that this should be denominated in units of the country’s currency).
(a) Compute the PPP rate between the other currency and the US dollar as P =Po/Pus and compare this to the official exchange rate.
(b) In this part find the prices of a service (e.g. a haircut or the price of housing) or more generally an object that is not freely traded on world markets in both the US and the country you picked above. Compute the PPP rate as you did in (2a) above and compare the two answers. Is this what you might expect?
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