16. In the US, the price of a Big Mac is $4. In China, the price of a Big Mac is 16 (12 points). i. What is the exchange rate of Chinese Yuan under purchasing power parity? ii. What is the dollar price of Big Mac in China, if the actual exchange rate is $0.125/? iii. Is the Chinese Yuan overvalued or undervalued? By how much? Formula: under(over)valuation = (actual rate- PPP rate) PPP rate Iv. Does the absolute form of Purchasing Power Parity holds? Why? 17. Fill the blank below with the given selections (5 points) A. Interest rate parity B. Purchasing Power Parity C. International Fisher Effect Parity 5 (1 + ipx) = (1 + ius) 1+lus 1+ius 1+1fx 1+ifx = 1+IUS St+1 = 1 Stitlex Where "S" is for spot rate,"i" is for interest rate, "T" is for inflation, "F" is for forward rate