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Macroeconomics 11th Edition by Michael Parkin
Edition 11ISBN: 9780133423884Macroeconomics 11th Edition by Michael Parkin
Edition 11ISBN: 9780133423884 Exercise 1
When the Chips Are Down
The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalued. In July 2012, the price of a Big Mac was $4.33 in New York, 15.65 yuan in Beijing, and 6.50 Swiss francs in Geneva. The exchanges rates were 6.37 yuan per U.S. dollar and 0.98 Swiss francs per U.S. dollar.
a. Was the yuan undervalued or overvalued relative to purchasing power parity?
b. Was the Swiss franc undervalued or overvalued relative to purchasing power parity
c. Do you think the price of a Big Mac in different countries provides a valid test of purchasing power parity
The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalued. In July 2012, the price of a Big Mac was $4.33 in New York, 15.65 yuan in Beijing, and 6.50 Swiss francs in Geneva. The exchanges rates were 6.37 yuan per U.S. dollar and 0.98 Swiss francs per U.S. dollar.
a. Was the yuan undervalued or overvalued relative to purchasing power parity?
b. Was the Swiss franc undervalued or overvalued relative to purchasing power parity
c. Do you think the price of a Big Mac in different countries provides a valid test of purchasing power parity
Explanation
Verified
Verified
Purchasing power parity:
Purchasing pow...
Macroeconomics 11th Edition by Michael Parkin
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