4. The Big Max index

Using data from The Economist's Big Mac Index for 2016, the following table shows the local currency price of a Big Mac hamburger in several oountries as well as the actual exchange rate between each countryr and the United States. At the time of the data collection, a Big Mac would have Dost you $4.93 in the United States and GBP 2.89 in the United Kingdom. 111e actual exchange rate between the British pound and the U.S. dollar was $1.63 per pound. 'l1'Ie dollar price of a Big Mac purchased in the United Kingdom was, therefore, computed as follows: Dollar Rise of a. Big Mac in the United Kingdom 2 GBP 239 x (3:113:00 = $4.71 _ For the price you paid for a Big Mac in the United States, you could have purchased a Big Mac in the United Kingdom and had some change left to go toward fries. Complete the finai column of the table by computing the dollar price of a Big Mac for the countries where this amount is not given. (Note: Round your answers to the nearest cent.) Big Mac Index: January 2016 Local Price Actual Exchange Rate Dollar Price Foreign Currency (Foreign currency) ( Dollars per unit of foreign currency) (Dollars) Brazil Real 13.50 0.30 Norway Kroner 46.80 0.12 United Kingdom Pound 2.89 1.63 4.71 Poland Zloty 9.60 0.36 3.46 China Yuan 17.60 0.16 2.82 Source: "Currency Comparison, To Go," The Economist, last modified January 7, 2016, accessed July 8, 2016, http://www.economist.com/blogs/graphicdetail/2016/01/daily-chart- 7. The law of one price states that exchange rates would need to equalize the prices of goods in any two countries. For the dollar price of a Big Mac to be the same in both countries, a U.S. citizen would need to be able to convert $4.93 into exactly GBP 2.89. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in the United States by the price in the United Kingdom: Law of One Price Exchange Rate (U.S. Dollars per British Pound) = $4.93 GBP 2.89 = $1.71 per British poundThe exchange rate that would have equalized the dollar price of a Big Mac in the United States and Brazil (that is, the law of one price exchange rate for Big Macs) is V . For this change to happen, the real would have to '7 against the dollar. If Big Macs were a durable good that could be transported between countries at no cost, which of the following would present arbitrage opportu nities? Check all that apply. Exporting Big Maps from Brazil to the United States Exporting Big Macs from Norwayr to China Exporting Big Maps from Poland to China