In the presence of purchasing-power parity,if five pesos exchange for one dollar and a new smartphone sells for $100 in Dallas,then the identical smartphone in Mexico City should cost:

Question

Quizplus · Accepted Answer

Purchasing-power parity (PPP) suggests that in the absence of transportation and other transaction costs, identical goods should have the same price when expressed in a common currency. If 5 pesos exchange for 1 dollar, then a $100 smartphone in Dallas should cost 500 pesos in Mexico City (100 dollars * 5 pesos/dollar = 500 pesos).

In the Presence of Purchasing-Power Parity,if Five Pesos Exchange for One