Multiple Choice
Suppose the exchange rate between the U.S.dollar and the Mexican peso was $1 = 5 pesos.A can of Pepsi sells for $2 in Boston and 12 pesos in Mexico City.
A) Purchasing power parity prevails with these prices.
B) Purchasing power parity does not prevail with these prices.
C) The U.S. dollar would be expected to depreciate.
D) None of the above answers is correct.
Correct Answer:
Verified
Correct Answer:
Verified
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