Suppose That a Typical Basket of Goods Costs 400 Pesos

question 51

Multiple Choice

Suppose that a typical basket of goods costs 400 pesos in Mexico and 25 pounds in Britain and that the market exchange rate is 25 pesos per pound.Using purchasing power parity, the appropriate exchange rate for comparing the incomes of the two countries is:

• A)0.25 pesos per pound.
• B)10 pesos per pound.
• C)16 pesos per pound.
• D)25 pesos per pound.

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