Suppose a McDonald's Big Mac costs 30 pesos in Argentina. At the same time, suppose the exchange rate between the peso and the euro is roughly 15 pesos per euro. According to purchasing power parity, a Big Mac in Europe should cost:
A. 15 euros.
B. 30 euros.
C. 2 euros.
D. 0.50 euros.
Answer: C
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U.S. dollar bills
A) are backed by gold. B) are backed by silver. C) are backed by platinum. D) are backed by uranium. E) are not backed by any precious metal.
The perfectly competitive firm:
A) makes its profit-maximizing decision only on the basis of output. B) faces a downward-sloping demand function. C) can influence market price only in a downward direction. D) cannot earn any economic profits because it faces a horizontal demand curve.
The minimum efficient scale is
A) the level of output where diminishing returns have not set in yet. B) the plant size that yields the most profit. C) the smallest level of operation where long-run average costs are lowest. D) the smallest output level where the firm finally reaches productive efficiency.
The regulation that sets the minimum fraction of deposits banks must hold in reserve is called the:
A. reserve requirement. B. money multiplier. C. interest rate. D. dual mandate.