According to PPP,when the Big Mac has a high price in terms of local currency,then the exchange rate quoted in U.S. dollars per unit of local currency should be ________.

Question

Quizplus · Accepted Answer

According to the theory of PPP, the price of a Big Mac in a country should be similar across the world when measured in the same currency (usually the US dollar). Therefore, if the price of a Big Mac is high in terms of local currency, it suggests that the local currency is overvalued compared to the US dollar. So, to maintain the parity of purchasing power, the exchange rate quoted in US dollars per unit of local currency should be low. Therefore, the correct answer is (A) low.

According to PPP,when the Big Mac Has a High Price