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Euro area Norway United Kingdom Poland China Actual Exchange Rate (Foreign currency) (Dollars per unit of foreign currency) 1.12 0.12 1.25 0.26 0.14 4.08 42.00 3.29 10.80 21.00 PPP Exchange Rate (U.S. Dollars per British pound) Dollar Price (Dollars) 8374 GBP 1.39 $1.74 per pound 4,11 2.81 2.94 Source: "The Big Mac Index, Our Interactive Currency Comparison Tool," The Economist, last modified January 10, 2019, accessed September 27, 2019, https://www.economist.com/news/2019/07/10/the-big-mac-index 4.57 Purchasing-power party (PPP) theory states that exchange rates would need to equalize the prices of goods in any two countries. For the dollar price of a Big Mac to be the same in both countries, a U.S. citizen would need to be able to convert $5.74 into exactly GBP 3.29. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in the United States by the price in the United Kingdom: 5.04 Exporting Big Macs from the Euro area to the United Sta Exporting Big Macs from the United Kingdom to Poland O Exporting Big Macs from Norway to China The exchange rate that would have equalized the dollar price of a Big Mac in the United States and the Euro area (that is, the PPP exchange rate for Big Macs) is This change would mean that the euro had against the dollar. If Big Macs were a durable good that could be costlessly transported between countries, which of the following would present an arbitrage opportunity? Check all that apply.

Euro area Norway United Kingdom Poland China Actual Exchange Rate (Foreign currency) (Dollars per unit of foreign currency) 1.12 0.12 1.25 0.26 0.14 4.08 42.00 3.29 10.80 21.00 PPP Exchange Rate (U.S. Dollars per British pound) Dollar Price (Dollars) 8374 GBP 1.39 $1.74 per pound 4,11 2.81 2.94 Source: "The Big Mac Index, Our Interactive Currency Comparison Tool," The Economist, last modified January 10, 2019, accessed September 27, 2019, https://www.economist.com/news/2019/07/10/the-big-mac-index 4.57 Purchasing-power party (PPP) theory states that exchange rates would need to equalize the prices of goods in any two countries. For the dollar price of a Big Mac to be the same in both countries, a U.S. citizen would need to be able to convert $5.74 into exactly GBP 3.29. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in the United States by the price in the United Kingdom: 5.04 Exporting Big Macs from the Euro area to the United Sta Exporting Big Macs from the United Kingdom to Poland O Exporting Big Macs from Norway to China The exchange rate that would have equalized the dollar price of a Big Mac in the United States and the Euro area (that is, the PPP exchange rate for Big Macs) is This change would mean that the euro had against the dollar. If Big Macs were a durable good that could be costlessly transported between countries, which of the following would present an arbitrage opportunity? Check all that apply.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Euro area Norway United Kingdom Poland China Local Price: (Foreign currency) 4.08 42.00 3.29 10.80 21.00 Actual Exchange Rate (Dollars per unit of foreign currency) 1.12 0.12 1.25 0.26 0.14 PPP Exchange Rate (U.S. Dollars per British pound) Source: "The Big Mac Index, Our Interactive Currency Comparison Tool, The Economist, last modified January 10, 2019, accessed September 27, 2019, https://www.economist.com/news/2019/07/10/the-big-mac-index. - Dollar Price (Dollars) Purchasing-power parity (PPP) theory states that exchange rates would need to equalize the prices of goods in any two countries. For the dollar price of a Big Mac to be the same in both countries, a U.S. citizen would need to be able to convert $5.74 into exactly GBP 3.29. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in the United States by price in the United Kingdom: $5.76 GBP 3.29 $1.74 per pound 4.11 2.81 2.94 4.57 5.04 Exporting Big Macs from the Euro area to the United States Exporting Big Macs from the United Kingdom to Poland Exporting Big Macs from Norway to China The exchange rate that would have equalized the dollar price of a Big Mac in the United States and the Euro area (that is, the PPP exchange rate for Big Macs) is This change would mean that the euro had against the dollar. If Big Macs were a durable good that could be costlessly transported between countries, which of the following would present an arbitrage opportunity? Check all that apply.
Transcribed Image Text:Euro area Norway United Kingdom Poland China Local Price: (Foreign currency) 4.08 42.00 3.29 10.80 21.00 Actual Exchange Rate (Dollars per unit of foreign currency) 1.12 0.12 1.25 0.26 0.14 PPP Exchange Rate (U.S. Dollars per British pound) Source: "The Big Mac Index, Our Interactive Currency Comparison Tool, The Economist, last modified January 10, 2019, accessed September 27, 2019, https://www.economist.com/news/2019/07/10/the-big-mac-index. - Dollar Price (Dollars) Purchasing-power parity (PPP) theory states that exchange rates would need to equalize the prices of goods in any two countries. For the dollar price of a Big Mac to be the same in both countries, a U.S. citizen would need to be able to convert $5.74 into exactly GBP 3.29. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in the United States by price in the United Kingdom: $5.76 GBP 3.29 $1.74 per pound 4.11 2.81 2.94 4.57 5.04 Exporting Big Macs from the Euro area to the United States Exporting Big Macs from the United Kingdom to Poland Exporting Big Macs from Norway to China The exchange rate that would have equalized the dollar price of a Big Mac in the United States and the Euro area (that is, the PPP exchange rate for Big Macs) is This change would mean that the euro had against the dollar. If Big Macs were a durable good that could be costlessly transported between countries, which of the following would present an arbitrage opportunity? Check all that apply.
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