1.23 When the Chips Are Down The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalued.

In July 2012, the price of a Big Mac was $4.33 in New York, 15.65 yuan in Beijing, and 6.50 Swiss francs in Geneva. The exchange rates were 6.37 yuan per US dollar and 0.98 Swiss francs per US dollar.

Source: The Economist, 25 July 2012 a Was the yuan undervalued or overvalued relative to purchasing power parity? b Was the Swiss franc undervalued or overvalued relative to purchasing power parity?

c Do you think the price of a Big Mac in different countries provides a valid test of purchasing power parity?