Assume that US$1 will buy 110 yen. If absolute purchasing power parity exists between the United States and Japan, and if the Big Mac meal costs $5 in the United States, it will cost _____ in Japan.

Question

Quizplus · Accepted Answer

Absolute purchasing power parity implies that the same product should have the same price across different countries when prices are expressed in a common currency. Since $1 = 110 yen and a Big Mac costs $5 in the US, it should cost 5 * 110 = 550 yen in Japan.

Assume That US$1 Will Buy 110 Yen