IF when cost $4 per bushel in the United States and 2 pounds per bushel in Great Britain then in the presence of purchasing power parity the exchange rate should be ?
Correct answer: C. $2.00 per pound
- A. $50 per pound
- B. $1.00 per pound
- C. $2.00 per pound
- D. $8.00 per pound
Explanation
Purchasing power parity equates the price of the bushel: $4 equals £2, so one pound equals $2. Therefore, the exchange rate is $2.00 per pound.
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