5. In class we discussed The Economist's Big Mac Index which is based on a representative basked of agricultural commodities. Let's consider a basket of high-tech commodities and call it the MacBook Air Index.

(a) The USD-KRW exchange rate according to Bloomberg on November 16th was 1,185.42. What are the two currencies in this currency pair? What does this exchange rate mean?

(b) What is the price of the MacBook Air with the M1 Chip, 8-Core CPU, 8-Core GPU, and 512GB Storage in the U.S. and in South Korea? You need to subtract the value-added tax shown below the price in Korean Won to get the pre-tax price for comparison.

(c) How does the price of the MacBook Air in South Korea compare with the price implied by the price in the U.S. and the nominal exchange rate from Bloomberg given above?

(d) What nominal exchange rate is implied by the price of the MacBook Air in the U.S. and in South Korea if PPP holds?

(e) What real exchange rate is implied by the nominal exchange rate and the price of the MacBook Air in the U.S. and in South Korea?

(f) Does Purchasing Power Parity (PPP) hold? Why?