In the United States, a representative basket of goods has a price of $2500. In the UK, that same basket of goods has a price of £2000. What can be deduced from this?
- AThe £ sterling is 25 % overvalued.
- BThe £ sterling is 20 % undervalued.
- CThe purchasing power parity exchange rate of the £ sterling is $0.80 to the £.
- DThe purchasing power parity exchange rate of the £ sterling is $1.25 to the £.