What is the peso-dollar exchange rate

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-A cookie costs 1.5 dollars in the United States and 25 pesos in Mexico. What is the peso-dollar exchange rate (measured in pesos per dollar) if purchasing power parity holds?

-If a monetary expansion causes all prices in Mexico to double, so that a cookie now costs 50 pesos, what happens to the peso-dollar exchange rate?

-In a few sentences, explain the main logic behind purchasing power parity theory.

Reference no: EM133125683

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