If purchasing power parity holds,a bushel of rice costs $10 in the U.S. ,and the nominal exchange rate is 2 Thai bhat per dollar,what is the price of rice in Thailand?
A) 20 bhat
B) 10 bhat
C) 5 bhat
D) 2 bhat

Question

Quizplus · Accepted Answer

Purchasing power parity implies that the price of goods should be the same in different countries when expressed in a common currency. If a bushel of rice costs $10 in the U.S. and the exchange rate is 2 Thai baht per dollar, then the price in Thailand should be 10 dollars * 2 baht/dollar = 20 baht.

If Purchasing Power Parity Holds,a Bushel of Rice Costs $10