Question
A case study in Chapter 12 analyzed purchasing power parity for several countries using the price of a Big Mac. Go on the Website of
A case study in Chapter 12 analyzed purchasing power parity for several countries using the price of a Big Mac. Go on the Website of "The Economist" newspaper The Big Mac Index and find the data on the Big Mac Index for (either January 2024 or December 2023) and save it to your computer. Download and attach the article about the Big Mac Index to your assignment. For actual exchange rates, you may use the internet. Country Price of a Big Mac (In local currency) Predicted Exchange Rate Actual Exchange Rate (Per $US) HungaryThailand China Turkey Mexico Russia
- [12 marks] 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 $5.69 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 the internet. [Check the US dollar price of Big Mac on the website to confirm if it is $5.69, if not, use the latest price available]
- [7 marks] Summarize the article in one paragraph, highlighting the main points.
- [6 marks] Looking at the exchange rates predicted by the Purchasing Power Parity, how well do you think the theory of purchasing power parity explains exchange rates for the countries in the above table? Explain
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