If a market basket of goods cost $100 is the US and €70 in France,then the PPP exchange rate would be $.70/€.

Question

Quizplus · Accepted Answer

To calculate the PPP exchange rate, we would divide the price in one currency by the price in another currency, and then compare it to the official exchange rate. In this case, we would divide $100 by €70, which gives us approximately $1.43/€. If the official exchange rate is different from this, then we can say that the currencies are overvalued or undervalued relative to each other. Therefore, the statement that the PPP exchange rate would be $.70/€ is false.

If a Market Basket of Goods Cost $100 Is the US