4. A meal at a McDonald’s restaurant in New York costs $8. The identical meal at a McDonald’s restaurant in London costs £4.

According to the purchasing-power-parity theory of exchange rates, the exchange rate between U.S. dollars and British pounds should tend to move toward: LO27.3

a. $2 = £1.

b. $1 = £2.

c. $4 = £1.

d. $1 = £4.