Suppose a McDonalds Big Mac Cost $4

question 109

Multiple Choice

Suppose a McDonalds Big Mac cost $4.40 in the United States and 3.30 euros in the euro area and 5.72 Australian dollars in Australia. If exchange rates are .75 euros per dollar and 1.3 Australian dollars per dollar, where does purchasing-power parity hold?

• A) both the euro area and Australia
• B) the euro area but not Australia
• C) Australia but not the euro area
• D) neither the euro area nor Australia

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