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In country ABS, the price of big mac in China is Yuan10.5; In the U.S., a big mac costs $3.1. What is the implied exchange
In country ABS, the price of big mac in China is Yuan10.5; In the U.S., a big mac costs $3.1. What is the implied exchange rate according to the PPP theory? (PPP theory is basically the law of one price. It means that an identical good should be sold at identical price across countries.) At the time of the publication of the article, the exchange rate between the dollar and the yuan is yuan8.03 / dollar. Is dollar overvalue compared to the theoretical price in the Question 3? As it was pointed out in the article, Chinese Yuan is undervalued by 58%. The article concludes with Economists would be unwise to exclude Big Macs from their diet, but Super size servings would equally be a mistake." Please explain. 9. If Japanese investor want to buy U.S. bond, what would be their rate of return in a year? (Hint: ultimate goal of investment is for consumption. For Japanese, they have to convert their dollar investment back to Japanese yen to consume.) 10. Explain "If foreign goods and services look cheap, the dollar is probably overvalued." In country ABS, the price of big mac in China is Yuan10.5; In the U.S., a big mac costs $3.1. What is the implied exchange rate according to the PPP theory? (PPP theory is basically the law of one price. It means that an identical good should be sold at identical price across countries.) At the time of the publication of the article, the exchange rate between the dollar and the yuan is yuan8.03 / dollar. Is dollar overvalue compared to the theoretical price in the Question 3? As it was pointed out in the article, Chinese Yuan is undervalued by 58%. The article concludes with Economists would be unwise to exclude Big Macs from their diet, but Super size servings would equally be a mistake." Please explain. 9. If Japanese investor want to buy U.S. bond, what would be their rate of return in a year? (Hint: ultimate goal of investment is for consumption. For Japanese, they have to convert their dollar investment back to Japanese yen to consume.) 10. Explain "If foreign goods and services look cheap, the dollar is probably overvalued
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