Question

PURCHASING POWER PARITY In the spot market, 19.1 Mexican pesos can be exchanged for 1 U.S. dollar. A compact disc costs $15 in the United States. If purchasing power parity (PPP) holds, what should be the price of the same disc in Mexico

Answer 1

Answer: $286.50

Explanation:

Purchasing Power Parity (PPP) posits that prices are the same across countries given the rate of exchange between the currencies of the countries in question.

1 USD = 19.1 Mexican pesos.

Compact disc in Mexico would cost;

= 19.1 * 15

= $286.50