If a Starbucks Tall Latte Cost $3

question 88

Multiple Choice

If a Starbucks tall latte cost $3.20 in the United States and 3 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?

• A) .938 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area.
• B) .938 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. then in the Euro area.
• C) 1.067 If the exchange rate is less than this, it costs more dollars to buy a tall latte in the U.S. than in the Euro area.
• D) 1.067 If the exchange rate is less than this, it costs fewer dollars to buy a tall latte in the U.S. than in the Euro area.

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Definitions:

Predecessors

Individuals or entities that preceded others in a particular position, office, or situation, often setting precedents or foundations for those who follow.

Seven Years' War

A global conflict fought between 1756 and 1763 that involved most of the great powers of the time and affected Europe, North America, Central America, West Africa, India, and the Philippines.

Polish-Lithuanian Commonwealth

A dual-state union between Poland and Lithuania that existed from 1569 to 1795, characterized by a unique system of noble democracy and religious tolerance.

Noble Republic

A term often used to describe the Polish-Lithuanian Commonwealth between the 16th and 18th centuries, characterized by a unique system of elective monarchy and a strong nobility (szlachta).