If the real exchange rate between the U.S.and Argentina is 1,then
A)purchasing-power parity holds, and 1 U.S.dollar buys 1 Argentinean bolivar.
B)purchasing power parity holds, and the amount of currency needed to buy goods in the U.S.is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.
C)purchasing power parity does not hold, but 1 U.S.dollar buys 1 Argentinean bolivar.
D)purchasing power parity does not hold, but the amount of currency needed to buy goods in the U.S.is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

Question

Quizplus · Accepted Answer

If the real exchange rate is 1, purchasing power parity holds, meaning the same amount of currency can buy the same quantity of goods in both countries.

If the Real Exchange Rate Between the U