Suppose the Current Exchange Rate Between the U

question 18

Multiple Choice

Suppose the current exchange rate between the U.S.dollar and the Mexican peso is $0.12 = 1 peso.Furthermore,suppose the price level in Mexico rises 25 percent while the U.S.price level remains constant.According to the purchasing power parity theory,what will be the equilibrium exchange rate?

• A) $0.15 = 1 peso
• B) $0.09 = 1 peso
• C) $0.16 = 1 peso
• D) $0.096 = 1 peso

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Definitions:

Cholesterol

A sterol present in the tissues that contributes to heart disease when elevated; transported in the blood plasma of all animals.

Blood Pressure

The amount of force exerted by the heart on the blood as it pumps the blood through the arteries.

Hyponatremia

A condition where there is an abnormally low sodium concentration in the blood.