Suppose a Starbucks Tall Latte Cost $4

question 167

Multiple Choice

Suppose a Starbucks tall latte cost $4.00 in the United States and 3.20 euros in the Euro area. Also, suppose a McDonald's Big Mac costs $4.40 in the United States and 5.50 euros in Euro area. If the nominal exchange rate is .80 euros per dollar, the prices of which goods have prices that are consistent with purchasing-power parity?

• A) both the tall latte and the Big Mac
• B) the tall latte but not the Big Mac
• C) the Big Mac but not the tall latte
• D) neither the tall latte nor the Big Mac

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Definitions:

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The process of negotiating the terms of an agreement or contract between two or more parties.

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The act of formally confirming or approving an agreement or act, making it officially valid.

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Refers to a legal declaration that an agreement or transaction is null and has no legal effect.