Calculate the change in the exchange rate

Reference no: EM13189460

the percentage undervaluation or overvaluation in the Big Mac, based on exchange rates in July 2009. Suppose purchasing power parity holds and in the long run, so that these deviations would be expected to disappear. Suppose the local currency prices of the Big Mac remained unchanged. Exchange rates in January 4, 2010, were as follows

Country Per U.S.

Australia (A$) 0.90

Brazil (real) 1.74

Canada (C$) 1.04

Denmark (krone) 5.17

Eurozone (euro) 0.69

India (rupee) 46.51

Japan (yen) 93.05

Mexico (peso) 12.92

Sweden (krona) 7.14

Based on these data and calculate the change in the exchange rate from July to January, and state whether the direction of change was consistent with the PPP-implied exchange rate using the Big Mac Index. How might you explain the failure of the Big Mac Index to correctly predict the change in the<br />nominal exchange rate between July 2009 and January 2010?

Reference no: EM13189460

Questions Cloud

What is the per worker production function : Suppose initially (period 0) the economy is endowed with $5 (billion) of capital stock and 10 (thousand) workers (let's ignore the units). We know that saving rate s is 0.15, population growth rate n is 0.01 and depreciation rate d is 0.09.

How many shares of each stock does she own : Shirley Cicero has $16,000 invested in Boeing and GE stock. The Boeing stock currently sells for $30 per share and the GE stock for $70 per share. If GE stock triples its value and the Boeing stock goes up 50%, her stock will be worth $34,5000. Ho..

Disadvantages to red fish and blue fish : What are the advantages and potential disadvantages to Red Fish, Blue Fish of having China (Liu-sheng Trading Company) as its sole source of supply? What would you recommend?

Find the torque at p : A child applies the brakes on a bicycle by applying a downward force of 20 pounds on the pedal when the crank makes a 40 degrees angel with the horizontal. The crank is 6 inches in length. Find the torque at P.

Calculate the change in the exchange rate : the percentage undervaluation or overvaluation in the Big Mac, based on exchange rates in July 2009. Suppose purchasing power parity holds and in the long run, so that these deviations would be expected to disappear. Suppose the local currency pri..

How many different pins are possible : a customer must enter his or her four-digit Personal Identification Number (PIN). How many different PINs are possible?

What is the intersection point of the two lines : Write down the parametric equation for a line that passes the points (2, 1) and (5, 4). Write down the implicit form of a line that passes the point (7, 0) and has unit normal √6/3,√3/3. What is the intersection point of the two lines?

Declaration of independence and bill of rights : Why does Henry Steele Commager claim that the new patriotism makes "a mockery of the Declaration of Independence and Bill of Rights"?

Estimate the operating expenses including taxes : You estimate the operating expenses, including taxes, will be $45,000 for the first year and that they will increase by $3000 each year thereafter. You also estimate that razing the building and selling the lot on which stands will realize a net a..

User Account

All Pages