ECON 1101 Winter 2023 Assignment 9: Exchange Rates 1. What is the current list price of an iPhone 14 in Canada, in Canadian dollars (according to https://themacindex. com/variants/MPX33/iphone-14-512gb?currency=USD)? (1) 2. What is the current list price of an iPhone 14 in the United States, in US dollars (according to https://themacindex. com/variants/MPX33/iphone-14-512gb?currency=USD)? (1) 3. What is the current exchange rate between the US and Canada? (1) 4. According to iPhone 14 prices, what should the exchange rate be? (2) 5. Based on your work above, is the Canadian dollar overvalued (Canadian dollar is worth more than it should be) or undervalued (Canadian dollar is worth less than it should be)? (1) 6. How does this compare to the Big Mac Index? Why do you think this is? (2)7. Whenever currencies are not at purchasing power parity, there is an opportunity for arbitrage. Explain how arbitrage works. What does arbitrage do to the price of goods in each country? Why? (4) 8. Why does arbitrage not create purchasing power parity with Big Macs? (1) 9. According to the Big Mac Index, is the Chinese yuan under or overvalued? (1) 10. Does this create a surplus or shortage of yuan? (1) 11. What monetary policy does China have to use to maintain their pegged exchange rate? Explain how this maintains the pegged exchange rate. (4) 12. What negative impact could maintaining a pegged exchange rate create for China's economy? (1)