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suppose only two goods: good A and good Bare Consumed in Australia and Europe, Assume the following: I, 1 unit of A costs $150 in

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suppose only two goods: good A and good Bare Consumed in Australia and Europe, Assume the following: I, 1 unit of A costs $150 in Australia Il. I unit of B costs $300 in Australia Ill. The law of one price holds for both good A and good B iv. In Europe, good A and good Beach account for 50%% of the aggregate consumption expenditure. Hence the Luropean government constructs the FU Price index as 0.5"(Price of A in Furos) + 0.5*(Price of A in Euros) v. In Australia, good A and B account for 90%% and 10% of the aggregate consumption expenditure respectively. Hence The Australian government constructs the AU Price Index as 0.5"[Price of A in AUD] + 0.1*(Price of B in AUD] If E=1.5, choose the most appropriate option: A. The EU price index = (225; the AU price index in AU = $120; Absolute PPP holds B. The EU price index = (150, the AU price index in AU = $180; Absolute PPP does not hold C. The EU price index = 6150, the AU price index in AU = $165; Absolute PPP holds D. The EU price index = 6150; the AU price index in AU = $225; Absolute PPP holds F. The FU price index = 6150, the AU price index in AU = $165; Absolute PPP does not hold

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