If a Basket of Goods Costs $100 in the United

Multiple Choice

If a basket of goods costs $100 in the United States and €120 in Europe, what would the purchasing power parity theory's prediction of the dollar/euro exchange rate be?

A) $1 = €1.20
B) $1 = €1
C) $1 = €0.80
D) $1 = €0.90
E) $1 = €1.10