A can of soda costs $1.25 in the United States and 25 pesos in Mexico. What is
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A can of soda costs $1.25 in the United States and 25 pesos in Mexico. What is the peso–dollar exchange rate (measured in pesos per dollar) if purchasingpower parity holds? If a monetary expansion causes all prices in Mexico to double, so that a soda now costs 50 pesos, what happens to the peso–dollar exchange rate?
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