If wheat costs $4 per bushel in the United States and 2 pounds per bushel in Great Britain,then in the presence of purchasing-power parity the exchange rate should be:
A) $.50 per pound
B) $1.00 per pound
C) $2.00 per pound
D) $8.00 per pound

Question

Quizplus · Accepted Answer

Purchasing-power parity implies that the exchange rate should equalize the price of goods in different countries. If wheat costs $4 in the US and 2 pounds in Great Britain, the exchange rate should be $2 per pound to equalize the cost.

If Wheat Costs $4 Per Bushel in the United States