Suppose the Same Basket of Goods Costs $100 in the USA

question 4

Multiple Choice

Suppose the same basket of goods costs $100 in the USA and £80 in Britain. According to PPP, if the prices do not change, what will be the exchange rate?

• A) $5 per pound
• B) $4 per pound
• C) $1.25 per pound
• D) $0.80 per pound