If relative purchasing power between the United States and Argentina is 3.22 pesos per dollar,under which circumstances would we say that the dollar is "overvalued"?

Question

Quizplus · Accepted Answer

If the actual exchange rate between the dollar and the Argentinean peso is higher than the relative purchasing power of the two currencies (in this case, above 3.22 pesos per dollar), we say that the dollar is overvalued. Therefore, B is the correct answer as 4 pesos per dollar is higher than the relative purchasing power of 3.22 pesos per dollar.

If Relative Purchasing Power Between the United States and Argentina