1. Discovering Data In recent years China has been routinely accused of currency manipulation. Use The Economist’s Big Mac Index to investigate these claims. Go to http://www.economist.com/content/big-mac-index to access the full dataset.

a. What is the most recent price of a Big Mac in China? What is the implied yuan/dollar exchange rate from this price?

b. Does this measure suggest that the Chinese yuan is overvalued or undervalued relative to the dollar? Why might this be beneficial to the Chinese economy?

c. The fundamental assumption of this index is that the cost of producing a Big Mac is identical across countries. Why might this assumption be violated? How might this violation affect your answer in part (b)?

d. Which three countries are most undervalued relative to the U.S. dollar in the most recent year? Which three are most overvalued?