A case study in the chapter analyzed purchasing-power parity for several countries using the price of Big Macs. Here are data for a few more countries: Price of Big Mac is $5.28.     Country              Price of a Big Mac Predicted Exchange Rate        Actual Exchange Rate Indonesia           35 750 rupiah       ___ rupiah/$US                     13 359 rupiah/$US Hungary             864 forint            ___ forint/$US                            252 forint/$US Czech Republic     79 koruna        ___ koruna/$US                         20.75koruna/$US Thailand                119 baht          ___ baht/$US                               31.95 baht/$US China                        20.4 yuan         ___ yuan/$US                              6.43 yuan/$US For each country, compute the predicted exchange rate of the local currency per U.S. dollar. (Recall that the U.S. price of a Big Mac was $5.28.) How well does the theory of purchasing-power parity explain exchange rates?

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  1. A case study in the chapter analyzed purchasing-power parity for several countries using the price of Big Macs. Here are data for a few more countries: Price of Big Mac is $5.28.  

 

Country              Price of a Big Mac Predicted Exchange Rate        Actual Exchange Rate

Indonesia           35 750 rupiah       ___ rupiah/$US                     13 359 rupiah/$US

Hungary             864 forint            ___ forint/$US                            252 forint/$US

Czech Republic     79 koruna        ___ koruna/$US                         20.75koruna/$US

Thailand                119 baht          ___ baht/$US                               31.95 baht/$US

China                        20.4 yuan         ___ yuan/$US                              6.43 yuan/$US

  1. For each country, compute the predicted exchange rate of the local currency per U.S. dollar. (Recall that the U.S. price of a Big Mac was $5.28.) How well does the theory of purchasing-power parity explain exchange rates?
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