Big Mac currencies. In 2006 a Big Mac cost ARS 7. 00 in Argentina and US$3.10 in the United States. Four years later, in 2010, the same Big Mac cost ARS 14. 00 in Argentina and US$3.73 in the United States.

a. What is the implied exchange rate according to the Big Mac currency parity in 2006 and 2010?

b. Knowing that the actual exchange rates in both years was ARS 3. 06 = US$1 and ARS 3. 93 = US$1, was the peso under- or overvalued in each year?

c. Assuming that the increase in the cost of the Big Mac is a reliable measure of price inflation in both countries, what should the PPP implied exchange rate be in 2010, assuming that the Big Mac exchange rate in 2006 was fairly overvalued?