Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are C$2.00 in Canada. PPP suggests that the price of a hamburger in the U.S. should be

Question

Quizplus · Accepted Answer

According to PPP, the price of a hamburger in Canada (C$2.00) should be equal to the price of a hamburger in the US (in US dollars).

Using the given exchange rate of C$1.00 = US$0.80, we can convert the price of a hamburger in Canada to US dollars:

C$2.00 x US$0.80/C$1.00 = US$1.60

Therefore, the price of a hamburger in the US should be US$1.60, which is option D.

Suppose Purchasing Power Parity (PPP) Depends Only on Hamburgers