In the presence of purchasing-power parity,if one dollar exchanges for one Euro and a new laptop sells for $750 in New York,then the identical laptop in Paris should cost:

Question

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Purchasing power parity (PPP) is the economic theory that suggests the exchange rate between two currencies should adjust until the price of an identical basket of goods and services costs the same amount in both countries.

In this case, if one dollar exchanges for one Euro, then the exchange rate is 1:1. This means that $750 is equal to 750 Euros. Therefore, the identical laptop in Paris should cost 750 Euros.

Choice A and B are not correct because they are lower than $750, which means that the identical laptop would be cheaper in Paris than in New York. Choice D is not correct because it is higher than $750, which means that the identical laptop would be more expensive in Paris than in New York.

In the Presence of Purchasing-Power Parity,if One Dollar Exchanges for One