The concept of purchasing power parity implies that the
A) Big Mac should cost about the same in all countries.
B) Big Mac should cost more in countries that are large beef consumers, because the demand for hamburgers is greater.
C) Big Mac is a poor measurement value.
D) cost of a Big Mac cannot be predicted across countries because it is only one product.

Question

Quizplus · Accepted Answer

Purchasing power parity states that the exchange rate between two countries should adjust to equalize the price of a basket of goods and services, including goods like the Big Mac. Therefore, the cost of a Big Mac should be relatively similar across countries if purchasing power parity holds true.

The Concept of Purchasing Power Parity Implies That the