Assume That P_E Is the Euro Price of a Product,P_AU

question 13

Multiple Choice

Assume that P_E is the euro price of a product,P_AU is the Australian price of the identical product,and S₀ is the spot exchange rate,quoted as the amount of Euro per Australian dollar.Given this,which one of the following correctly expresses absolute purchasing power parity?

• A)P_AU = S₀ + P_E
• B)P_E = S₀ / P_AU
• C)P_AU = S₀ ´ P_E
• D)P_E = S₀ ´ P_AU
• E)P_AU = S₀ / P_E

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