Question

The nominal exchange rate is .80 euros per U.S. dollar and a basket of goods in France costs 1,000 euros whilethe same basket costs $800 in the U.S. The nominal exchange rate is 1.2 Australian dollars per U.S. dollarand a basket of goods in Australia costs 960 Australian dollars while the same basket costs $800 in the U.S..Which country has purchasing-power parity with the U.S.?
a. both France and Australia
b. France but not Australia
c. Australia but not France
d. neither France nor Australia

Answer 1

C. Australia but not France