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Question
To express the PPP theory in symbols, let P$ be the U.S. dollar price of a basket of particular goods and P be the price of the same basket of goods in Japanese yen. The (purchasing power parity) PPP theory predicts that the dollar/yen exchange rate, E$/, should be equivalent to _____.
A. E$/= (1+P )/P$
B. E$/= (1 + P$)/P
C. E$/= P /P$
D. E$/= P$/P
E. E$/= (1+P$)/(1+P )
Answer
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