Define why this index may not be valid test of theory

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Reference no: EM1350341

1. The Big Mac Index computed by The Economist magazine has consistently found the U.S. dollar to be undervalued against some currencies and overvalued against others. This finding seems to call for a rejection of the purchasing power parity theory. Explain why this index may not be valid test of theory.

2.Why would China want its own currency to be undervalued relative to the U.S. dollar? How does China maintain an undervalued currency?

Reference no: EM1350341

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