Suppose we know that in France a litre of milk costs 5 euros and in Thailand a litre of milk costs 10 baht. If the exchange rate is currently 1 = 1.5baht then on a PPP basis we would conclude that

Select one:

a.

the euro and the baht are correctly valued.

b.

the euro is over-valued against the baht.

c.

the euro is under-valued against the baht.

d.

milk is too cheap in France.