If a McDonald's Big Mac cost $4.50 in the United States and 3.60 euros in the Euro area, then purchasing-power parity implies the nominal exchange rate is how many euros per dollar?
a. 1.25 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area.
b. 1.25 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. then in the Euro area.
c. .80 If the value is less than this, it costs more dollars to buy a Big Mac in the U.S. than in the Euro area.
d. .80 If the value is less than this, it costs fewer dollars to buy a Big Mac in the U.S. than in the Euro area.
d
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What will be an ideal response?
Read the following passage and then answer the question below.
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