Multiple Choice
A Big Mac in Japan costs 320 yen while it costs $3.60 in the U.S.. The nominal exchange rate is 80 yen per dollar. Which of the following would both make the real exchange rate move towards purchasing-power parity?
A) the price of Big Macs in the U.S. falls, the nominal exchange rate falls
B) the price of Big Macs in the U.S. falls, the nominal exchange rate rises
C) the price of Big Macs in the U.S. rises, the nominal exchange rate falls
D) the price of Big Macs in the U.S. rises, the nominal exchange rate rises
Correct Answer:
Verified
Correct Answer:
Verified
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