Suppose the Current Exchange Rate Between the U

question 4

Multiple Choice

Suppose the current exchange rate between the U.S.dollar and the Mexican peso is $0.10 = 1 peso.Furthermore,suppose the price level in Mexico rises 15 percent while the U.S.price level remains constant.According to the purchasing power parity theory,which of the following exchange rates comes closest to being the equilibrium exchange rate?

• A) $0.087 = 1 peso
• B) $0.085 = 1 peso
• C) $0.115 = 1 peso
• D) $0.13 = 1 peso

---

Definitions:

Real Estate

Property consisting of land and the buildings on it, along with its natural resources.

Social Guests

Individuals who are invited to visit someone's home or attend a private function or gathering without any expectation of providing a service or receiving payment.

Licensees

Individuals or entities that are granted permission to do certain things by another’s leave, such as occupying or using someone’s property.

Negligent Defendants

Individuals or entities being sued in civil court for harm caused by their failure to act as a reasonable person would have.