According to purchasing-power parity,if a basket of goods costs $100 in the U.S.and the same basket costs 800 pesos in Argentina,then what is the nominal exchange rate?
A)8 pesos per dollar
B)1 peso per dollar
C)1/8 peso per dollar
D)none of the above is correct

Question

Quizplus · Accepted Answer

Purchasing-power parity implies that the nominal exchange rate should equal the ratio of the price levels. Here, $100 in the U.S. is equivalent to 800 pesos in Argentina, so the exchange rate is 800 pesos / 100 dollars = 8 pesos per dollar.

According to Purchasing-Power Parity,if a Basket of Goods Costs $100