Consider the Following Excerpt from the Big Mac Index Table

Essay

Consider the following excerpt from the Big Mac Index table computed by The Economist magazine. The table shows prices of a Big Mac in local currencies and the current nominal exchange rate between the local currency and the U.S. dollar.

a.Compute the Big Mac prices in US dollars for each country.
b.Compute the PPP exchange rate.
c.Compute the over- or undervaluation of each country's currency with respect to the U.S. dollar. (A currency is considered to be overvalued if the nominal exchange rate is less than the PPP exchange rate. Overvaluation is the percentage difference between the nominal and the PPP exchange rate, computed using the following formula: [(PPP exchange rate - nominal exchange rate) / nominal exchange rate]*100.)