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If Purchasing Power Parity Holds,then If the Price of a Basket

Question 11

Multiple Choice

If purchasing power parity holds,then if the price of a basket of goods in the U.S.rose from $1,500 to $2,000 and the price of the same basket in Mexico rose from 12,000 pesos to 18,000 pesos


A) inflation was higher in the U.S.than Mexico so the U.S.dollar would appreciate.
B) inflation was higher in the U.S.than Mexico so the U.S.dollar would depreciate.
C) inflation was lower in the U.S.than Mexico so the U.S.dollar would appreciate.
D) inflation was lower in the U.S.than Mexico so the U.S dollar would depreciate.

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