If a market basket of goods cost $100 in the U.S. and €70 in France, then the PPP exchange rate would be $.70/€.

Question

Quizplus · Accepted Answer

The PPP exchange rate is calculated by dividing the cost of the market basket in one country by the cost of the market basket in another country. Therefore, the PPP exchange rate in this scenario would be $1.43/€, since $100 is equivalent to €70 at the given exchange rates.

If a Market Basket of Goods Cost $100 in the U.S