https://www.economist.com/finance-and-economics/2021/01/12/what-the-big-mac-index-tells-you-about-currency-wars

1. This question is about the article, "What the Big Mac index tells you about currency wars", published by The Economist on January 16, 2021. The article examines the valuation different currencies against the U.S. dollar, using the price of Big Mac as representative of a given basket of goods sold in a wide range of countries. The article states that: "Our burger-based index is premised on the idea that prices should adjust over the long run, so that the same basket of tradable goods costs the same everywhere." This premise is based on the idea that

a)The relative purchasing power parity hypothesis holds.

b)The absolute purchasing power parity hypothesis holds.

c)The relative purchasing power parity hypothesis does not hold.

d)The absolute purchasing power parity hypothesis does not hold.

e)Neither the absolute nor the relative purchasing power parity hypothesis holds.

f)The relative purchasing power parity hypothesis holds, but not the absolute purchasing power parity hypothesis.

2. The article, "What the Big Mac index tells you about currency wars", mentioned in the above question states that: "As wages tend to be lower in poor countries, though, Big Macs there may be cheaper. So we also calculate an index that adjusts for GDP per person." If this premise is true, then

a)The relative purchasing power parity hypothesis must hold.

a)The absolute purchasing power parity hypothesis must hold.

b)The relative purchasing power parity hypothesis does not hold.

c)The absolute purchasing power parity hypothesis does not hold.

d)Neither the absolute nor the relative purchasing power parity hypothesis can hold.

e)The relative purchasing power parity hypothesis holds, but not the absolute purchasing power parity hypothesis.