Country (currency measured in FX units) Per $ (EFX/$) Price of Market Basket (in FX) Price of U.S. Basket in FX (PUSx EFX/$) Real Exchange Rate qcountry/US Does PPP Hold? (yes or no) Is FX Currency Overvalued or Undervalued? Is FX Currency Expected to Have Real Appreciation or Depreciation? Brazil (real) 4.07 520 India (rupee) 68.51 12,000 Mexico (peso) 18.89 1,800 South Africa (rand) 15.78 800 Zimbabwe (Z$) 101,347 4,000,000
Country (currency measured in FX units) Per $ (EFX/$) Price of Market Basket (in FX) Price of U.S. Basket in FX (PUSx EFX/$) Real Exchange Rate qcountry/US Does PPP Hold? (yes or no) Is FX Currency Overvalued or Undervalued? Is FX Currency Expected to Have Real Appreciation or Depreciation? Brazil (real) 4.07 520 India (rupee) 68.51 12,000 Mexico (peso) 18.89 1,800 South Africa (rand) 15.78 800 Zimbabwe (Z$) 101,347 4,000,000
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
- For this question, treat the countries listed in each row as the home country, and treat the United States as the foreign country. Suppose the cost of the market basket in the United States is PUS = $190. Check to see whether PPP holds for each of the countries listed and determine whether we should expect a real appreciate or real
depreciation for each country (relative to the United States) in the long run.
You can fill out your answers in the table directly but please show how you worked out the problem for Brazil using the space below the table. Round your answers to 2 decimal places if necessary.
|
Country (currency measured in FX units) |
Per $ (EFX/$) |
(in FX) |
Price of U.S. Basket in FX (PUSx EFX/$) |
Real Exchange Rate qcountry/US |
Does PPP Hold? (yes or no) |
Is FX Currency Overvalued or Undervalued? |
Is FX Currency Expected to Have Real Appreciation or Depreciation? |
|
Brazil (real) |
4.07 |
520 |
|
|
|
|
|
|
India (rupee) |
68.51 |
12,000 |
|
|
|
|
|
|
Mexico (peso) |
18.89 |
1,800 |
|
|
|
|
|
|
South Africa (rand) |
15.78 |
800 |
|
|
|
|
|
|
Zimbabwe (Z$) |
101,347 |
4,000,000 |
|
|
|
|
|
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