If purchasing power parity exists and the exchange rate is 1.50 Australian dollars per British pound, then a latte that has a price of $4.00 in Sydney has a price of ________ in London, England.

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Purchasing Power Parity (PPP) suggests that in the absence of transportation and other transaction costs, identical goods should have the same price when expressed in the same currency. If 1 British pound equals 1.50 Australian dollars, then to find the price in pounds of a latte that costs 4.00 Australian dollars, you divide 4.00 by 1.50, which equals approximately 2.67 pounds.

If Purchasing Power Parity Exists and the Exchange Rate Is