The Economist magazine is famous for its publication of the Big Mac indexlong da

Question

The Economist magazine is famous for its publication of the Big Mac indexlong dash—a table of Big MacTM prices in different countries around the world. The use of the Big Mac allows for a highly standardized product sold throughout the world.

Given the following abbreviated table:

Country

PriceBig

China

12,000 yuan

Indonesia

Rp. 20,000

U.K.

pound£1.25

U.S.

$2.50

If the law of one price holds, what are the following implied exchange rates?

$_ = pound£1.00.

Rp _ = $1.00

Country

PriceBig

China

12,000 yuan

Indonesia

Rp. 20,000

U.K.

pound£1.25

U.S.

$2.50

Explanation / Answer

Answer :- $2 = pound£1.00. ( $2.50 / pound£1.25 = 2 )

Rp 8000 = $1.00 ( Rp. 20,000 / $2.50 = 8000 )

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.