12. 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:

Country Price of a Big Mac Predicted Exchange Rate Actual Exchange Rate Indonesia 30 500 rupiah

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rupiah/

$US 13 344 rupiah/$US Hungary 900 forint

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forint/

$US 283 forint/$US Czech Republic 70.0 koruna

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koruna/

$US 24.7 koruna/$US Thailand 108 baht

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baht/

$US 34.1 baht/$US China 17.0 yuan

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yuan/

$US 6.21 yuan/$US Source: Based on data from “The Big Mac Index," The Economist Newspaper Limited, London. July 16,2015. http://www.economist.com/content/big-mac-index

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 $4.79.) How well does the theory of purchasing-power parity explain exchange rates?

b. According to purchasing-power parity, what is the predicted exchange rate between the Hungarian forint and the Chinese yuan? What is the actual exchange rate?