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Using data from The Economist 's Big Mac Index for 2016, the following table shows the local currency price of a Big Mac hamburger in
Using data from The Economist's Big Mac Index for 2016, the following table shows the local currency price of a Big Mac hamburger in several countries as well as the actual exchange rate between each country and the United States. At the time of the data collection, a Big Mac would have cost you $4.93 in the United States and GBP 2.89 in the United Kingdom. The actual exchange rate between the British pound and the U.S. dollar was $1.63 per pound. The dollarprice of a Big Mac purchased in the United Kingdomwas, therefore, computed as follows:
Big Mac Index: January 2016 Local Price Actual Exchange Rate Dollar Price Foreign Currency (Foreign currency) (Dollars per unit of foreign currency) (Dollars) Brazil Real 13.50 0.30 Norway Kroner 46.80 0.12 United Kingdom Pound 2.89 1.63 4.71 Poland Zloty 9.60 0.36 3.46 China Yuan 17.60 0.16 2.82 Source: "Currency Comparison, To Go," The Economist, last modified January 7, 2016, accessed July 8, 2016, http://www.economist.com/blogs/graphicdetail/2016/01/daily-chart-The exchange rate that would have equalized the dollar price of a Big Mac in the United States and Brazil (that is, the law of one price exchange rate for Big Macs) is 'V . For this change to happen, the real would have to V against the dollar. If Big Macs were a durable good that could be transported between countries at no cost, which of the following would present arbitrage opportunities? Check all that apply. [3 Exporting Big Macs from Norwayr to China [:l Exporting Big Macs from the United Kingdom to Poland [3 Exporting Big Macs from Brazil to the United StatesStep by Step Solution
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