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For each country, compute the predicted exchange rate of the local currency perU.S. dollar, asuming that the price of a Big Mac in the US

For each country, compute the predicted exchange rate of the local currency perU.S. dollar, asuming that the price of a Big Mac in the US is $5.5. Hint: show allyour calculations .b) How well does the theory of purchasing-power parity explain exchange rates?

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Question 3 (10 marks) A case study on purchasing-power parity for several countries. Country Price of Big Mac Actual exchange rate Sweeden 50 Krona 9.80 Krona/US$ Australia 7 ($ AUD) 1.36 AUD/US$ Mexico 80 Peso 20.95 Peso/US$ Chile 5000 Chilean Peso 806.45 Peso/US$ Japan 1000 Yen 114.79 Yen/US$

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