According to purchasing power parity, if a Big Mac sells for $3.49 in the United States and 47.25 pesos in Mexico, what is the peso/$ exchange rate?

Question

Quizplus · Accepted Answer

According to the PPP theory, the exchange rate should reflect the price levels of the two countries. Therefore, the exchange rate can be calculated as:

47.25 pesos / $3.49 = 13.54 pesos/$

So, the correct answer is D, Ps13.54 = $1.

According to Purchasing Power Parity, If a Big Mac Sells