What is the purchasing power parity

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Assume the cost of market basket of goods in UK is 2500 pounds and $4500 in the US. Please use the absolute purchasing power parity to find the exchange rate dollar per pound. If the actual exchange rate is 1.7 dollar per pound, is the dollar undervalued or overvalued according to the purchasing power parity. What is the purchasing power parity?

Reference no: EM13883225

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