An MP3 player in Singapore costs 200 Singaporean dollars.In the U.S.it costs 100 US dollars.What is the nominal exchange rate if purchasing-power parity holds?
A)2.0
B)1.0
C).50
D)None of the above is correct.

Question

Quizplus · Accepted Answer

Purchasing-power parity implies that the exchange rate should equal the ratio of the price levels. Here, 200 Singaporean dollars / 100 US dollars = 2.0.

An MP3 Player in Singapore Costs 200 Singaporean Dollars