Which one of the following formulas expresses the absolute purchasing power parity relationship between the U.S.dollar and the British pound?

Question

Quizplus · Accepted Answer

The absolute purchasing power parity (PPP) relationship between two currencies states that the exchange rate between the currencies should equal the ratio of the price levels in the two countries. In this case, the formula that expresses the PPP relationship between the U.S. dollar and the British pound is PS1U1B1UKS1U1B0 = SS1U1B10S1U1B0 × PS1U1B1USS1U1B0. This formula shows that the price level of goods and services in the United Kingdom (PS1U1B1UK) is equal to the price level of goods and services in the United States (PS1U1B1US) multiplied by the exchange rate between the two currencies (SS1U1B1US). Rearranging the formula gives the correct answer: PS1U1B1UKS1U1B0 = SS1U1B10S1U1B0 × PS1U1B1USS1U1B0.

Which One of the Following Formulas Expresses the Absolute Purchasing