Question
A case study in Chapter 12 analyzed purchasing power parity for several countries using the price of Big Mac. Go on the Website of The
A case study in Chapter 12 analyzed purchasing power parity for several countries using the price of Big Mac. Go on the Website of "The Economist" newspaperThe Big Mac Index and find the data on the Big Mac Index for (December 2021)
this is the link: http://economist.com/big-mac-index
Country | Price of a Big Mac (In local currency) | Predicted Exchange Rate | Actual Exchange Rate (Per $US) |
Hungary | |||
Thailand | |||
China | |||
Turkey | |||
Mexico | |||
Russia | |||
a. Using the data table from "The Economist", fill in the data on local price of the Big Mac and actual exchange rate. Then compute the predicted exchange rate of the local currency per U.S. dollar. (Note that the U.S. price of a Big Mac is $5.81 and in the article U.S currency can be used as base currency, not Canadian dollar). Make sure to show your calculations in the predicted exchange rate column. [Please don't print the entire data table from the website.] For actual exchange rates, you may use internet.
b.Looking at the exchange rates predicted by the Purchasing Power Parity, how well do you think does the theory of purchasing power parity explain exchange rates? This should be based on the data in your table for selected countries above.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started