Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 31 - Part XI - Open-Economy Macroeconomics: Basic Concepts - Quick Check Multiple Choice - Page 680: 5

Answer

b. 1/3 euro per dollar

Work Step by Step

Purchasing-power parity would allow a dollar to buy the same quantity of goods in New York as it would in Paris when converted to euros. The exchange rate is calculated by using the ratio of 2 euros to 6 dollars, which simplifies to 1/3 euro per dollar. $2/6$ = $1/3$
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