According to purchasing-power parity theory, if the same fast-food hamburger costs $4.00 in Canada and 8 euros in France, what should the nominal exchange rate be?
A) 1/4 euros per dollar
B) 1/2 euro per dollar
C) 1 euro per dollar
D) 2 euros per dollar

Question

Quizplus · Accepted Answer

According to purchasing-power parity, the exchange rate should equalize the price of goods in different countries. If a hamburger costs $4.00 in Canada and 8 euros in France, the exchange rate should be 8 euros / 4 dollars = 2 euros per dollar.

According to Purchasing-Power Parity Theory, If the Same Fast-Food Hamburger