If the real exchange rate between the U.S.and Argentina is 1,then
A)purchasing-power parity holds,and 1 U.S.dollar buys 1 Argentinean bolivar.
B)purchasing-power parity holds,and the amount of dollars needed to buy goods in the U.S.is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.
C)purchasing-power parity does not hold,but 1 U.S.dollar buys 1 Argentinean bolivar.
D)purchasing-power parity does not hold,but the amount of dollars needed to buy goods in the U.S.is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

Question

Quizplus · Accepted Answer

Purchasing-power parity holds when the exchange rate between two currencies is equal to the ratio of the prices of a basket of goods in the two countries. In this case, the real exchange rate is 1, which means that the price of a basket of goods in the U.S. is the same as the price of the same basket of goods in Argentina. Therefore, purchasing-power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

If the Real Exchange Rate Between the U