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If the theory of purchasing power parity holds, how much does an Egyptian tapestry cost in the United States if the same tapestry sells for 15,000 Egyptian pounds in Egypt and the exchange rate is [tex]$0.14[/tex] per Egyptian pound?

A. [tex]$12,000[/tex]
B. [tex]$2,100[/tex]
C. [tex]$107,143[/tex]
D. [tex]$3,148[/tex]

Answer :

To find the cost of the Egyptian tapestry in U.S. dollars, we use the exchange rate to convert from Egyptian pounds to dollars.

1. The price of the tapestry in Egypt is given as
[tex]$$15,\!000 \text{ Egyptian pounds.}$$[/tex]

2. The exchange rate is
[tex]$$\$0.14 \text{ per Egyptian pound.}$$[/tex]

3. To convert the price into U.S. dollars, multiply the price by the exchange rate:
[tex]$$\text{Cost in US dollars} = 15,\!000 \times 0.14.$$[/tex]

4. Calculating the above multiplication:
[tex]$$15,\!000 \times 0.14 = 2,\!100.$$[/tex]

Thus, the tapestry costs
[tex]$$\boxed{\$2,\!100}$$[/tex]
in the United States.

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