1.21 Does purchasing power parity hold? If not, does PPP predict that the Brazilian real will appreciate or depreciate against the US dollar? Explain. The Brazilian real has appreciated 33 per cent against the US dollar and has pushed up the price of a Big Mac in Sao Paulo to

$4.60, higher than the New York price of $3.99. Despite Brazil’s interest rate being at 8.75 per cent a year compared to the US interest rate at near zero, foreign funds flowing into Brazil surged in October