![]() If, at the existing exchange rate, it costs less than 60,000 pesos to buy the same basket of goods in the United States, then purchasing power parity implies that the: Since the same quantity of yen will not buy the same basket of goods in the United States, it must cost more yen to buy a dollar than is consistent with purchasing power parity.ġ53.Suppose 60,000 pesos buys a basket of goods in Mexico. ![]() If, at the existing exchange rate, it costs more than 500,000 yen to buy the same basket of goods in the United States, then purchasing power parity implies that the: Since 30 pesos is equivalent to 2 euros, this is what the Big Mac should cost in Europe if purchasing power parity holds.ġ52.Suppose 500,000 yen buys a basket of goods in Japan. According to purchasing power parity, a Big Mac in Europe should cost:Īccording to purchasing power parity, 30 pesos, when converted into euros, should buy a European Big Mac. At the same time, suppose the exchange rate between the peso and the euro is roughly 15 pesos per euro. ![]() 151.Suppose a McDonald's Big Mac costs 30 pesos in Argentina.
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