According to purchasing power parity, if it takes five times as many Russian rubles to buy a basket of goods in Russia as it takes U.S. dollars to buy a basket of goods in the United States, then:
A) the equilibrium exchange rate should be five rubles per dollar.
B) there is a lower rate of inflation in Russia than in the United States.
C) the equilibrium exchange rate should be one ruble per five dollars.
D) the law of one price no longer holds.
Correct Answer:
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