To determine the nominal exchange rate between euros and dollars based on the concept of purchasing-power parity (PPP), we can use the prices of the cup of coffee in both countries.
The price of coffee in Germany is 1.5 euros, and the price of coffee in the United States is $0.50.
According to purchasing-power parity, the exchange rate can be calculated using the formula:
\[ \text{Nominal Exchange Rate} = \frac{\text{Price in Germany (in euros)}}{\text{Price in the US (in dollars)}} \]
Substituting the values we have:
\[ \text{Nominal Exchange Rate} = \frac{1.5 \text{ euros}}{0.50 \text{ dollars}} = 3 \text{ euros per dollar} \]
Therefore, the nominal exchange rate between euros and dollars, if purchasing-power parity holds, is:
a. 3 euros per dollar