Suppose 60,000 pesos buys a basket of goods in Mexico. 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:

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Purchasing power parity implies that the exchange rate should adjust so that the same basket of goods costs the same amount in both countries. If it costs less than 60,000 pesos to buy the same basket of goods in the United States, then the dollar should cost more pesos to maintain purchasing power parity.

Suppose 60,000 Pesos Buys a Basket of Goods in Mexico