Suppose the exchange rate for 1 euro is $1.40. Purchasing power parity exists if a fast-food meal in the United States costs $5, and in Paris, that same fast-food meal costs

Question

Quizplus · Accepted Answer

According to the purchasing power parity theory, the exchange rate should adjust in such a way that goods have the same price in different countries. In this case, if a fast-food meal costs $5 in the US, then it should cost the equivalent amount in euros in Paris. 
To figure out how many euros the meal should cost, we can use the exchange rate:
$5 = 5/1.40 ≈ 3.57
Therefore, the answer is B) 3.57 euros.

Suppose the Exchange Rate for 1 Euro Is $1