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Chrome File Edit View History Bookmarks People Window Hel Home Chegg.co (--. C O ng·cengage.com/static/nb/ui/index.html?nbld-624720&nbNodeld-229; Cengage x y MindTap-Cengage Lex e MINOTAP e Due Today at 11:59 PM EST c Back to Assignment Attempts Keep the Highest: 12 8. Problems and Applications Q8 A case study in the chapter analyzed purchasing-power parity for several countries using the price For each country, select the predicted exchange rate of the local currency per U.S. dollar. Hint Recall that the U.S. price of a Big Mac was $4.93.) Country Price of a Big Mac Predicted Exchange Rate Actual Exchange Rate Chile Hungary Czech Republic Brazil Canada 715 pesos/s 293 forints/s 25.1 korunas/s 4.02 reals 1.41 C/S 2,100 pesos 900 forints 235 pesos/s 426 pesos/s 860 pesos/s 3,525 pesos/s 75 k orunas 13.5 real 5.84 C4 rate between the Hungarian forint According to purchasing-power parity, the and the Canadian dollar is is . forints per Canadian dollar. However, ye actual exchange rate forints per Canadian dollar. Corsnue without savinExplanation / Answer
Predicted exchange rate or implied exchange rate is found by dividing each currency's price of Big Mac by 4.93 to get the exchange rate in terms of dollar
Country
Price of Big Mac
One price
Predicted exchange rate
Chile
2100
4.93
426
Hungary
900
4.93
183
CR
75
4.93
15.2
Brazil
13.5
4.93
2.74
Canada
5.84
4.93
1.18
According to PPP, predicted exchange rate between forint and dollar will be 900/5.84 = 154 forints per Canadian dollar but actual exchange rate is 293/1.41 = 208 forints per Canadian
Country
Price of Big Mac
One price
Predicted exchange rate
Chile
2100
4.93
426
Hungary
900
4.93
183
CR
75
4.93
15.2
Brazil
13.5
4.93
2.74
Canada
5.84
4.93
1.18
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