According to purchasing-power parity theory,if the same fast-food hamburger costs $2.50 in Canada and 5 euros in France,what should the nominal exchange rate be?
A)2 euros per dollar
B)1 euro per dollar
C)1/2 euro per dollar
D)1/4 euro per dollar

Question

Quizplus · Accepted Answer

The purchasing-power parity theory states that the exchange rate between two currencies should be equal to the ratio of the prices of a basket of goods in the two countries. In this case, the price of a hamburger is $2.50 in Canada and 5 euros in France. Therefore, the nominal exchange rate should be 5 euros / $2.50 = 2 euros per dollar.

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