LIC AAO Model Paper 1

Question : 42 of 160

Marks: +1, -0

The currencies in countries M and N are denoted by m and n respectively. The exchange rate in 1990 was 1m, 0.6n the price level in 2006 in M and N are 150 and 400 respectively with 1990 as a base of 100. The exchange rate in 2006 based solely on the purchasing power parity consideration is 1 m :

0.225 n
0.625 n .
1.6 n
3.6 n
None of these

Validate

Solution:

{1m}/{150}

{0.6n}/{400}

⇒ 1m =

{0.6}/{400}

× 150n = 0.225 n

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