While shopping in the Mexican market, you find that limes cost 11 pesos each. You remember that back in the U.S., they cost 80 cents each. If the purchasing power parity theory holds, the rate of exchange is

Name: While shopping in the Mexican market, you find that limes cost 11 pesos each. You remember that back in the U.S., they cost 80 cents each. If the purchasing power parity theory holds, the rate of exchange is
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Question

Quizplus · Accepted Answer

11 pesos/$0.80 = 13.75 pesos per dollar
$1/13.75 pesos per dollar = 7.3 cents/peso

While Shopping in the Mexican Market, You Find That Limes