Essay
The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In January 2017,the Economist reported that the average price of a Big Mac in the United States was $4.93.In Mexico,the average price of a Big Mac at that time was 49 pesos.If the exchange rate between the dollar and the peso was 13.60 pesos per dollar,how would purchasing power parity predict the exchange rate will change in the long run? Support your answer graphically.
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