A case study in the chapter analyzed purchasing power parity for several countries using the price of Big Macs. Here are data for a few more countries:

a. For each country, compute the predicted exchange rate of the local currency per U.S. dollar. (Recall that the U.S. price of a Big Mac was $3.57.)
b. According to purchasing-power parity, what is the predicted exchange rate between the Hungarian forint and the Canadian dollar? What is the actual exchange rate?
c. How well does the theory of purchasing power parity explain exchangerates?

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Predicted Exchange Rate Actual Exchange Rate Price of a Country Big Mac Chile Hungary Czech Republic Brazil Canada 1,750 pesos 720 forints pesos/ 549 pesos/ forints/ 199 forints/$ korunas/$ 18.7 korunas/$ _real/ C$/$ 67.9 korunas 8.03 real 3.89 C$ 2.00 real/$ 1.16 C$/S