Where can you buy cheaper hamburgers: britain or u.s

Reference no: EM13866488

In July 2014, the average price of a Big Mac was £2.80 in Britain and $4.20 in the U.S. The actual exchange rate was $1.60/£. Please answer the following questions:
1)Where can you buy cheaper hamburgers: Britain or U.S.?
2)Calculate the "correct" exchange rate, based on the law of one price.
3)Based on the PPP, was the British pound overvalued or undervalued and by how much?

Reference no: EM13866488

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