An amusing of purchasing power parity is the Economist's Big Mac Index. Under PPP, movements in countries'
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Question:
An amusing of purchasing power parity is the Economist's Big Mac Index. Under PPP, movements in countries' exchange rate should in the long-term mean that the prices of an identical basket of goods and services are equalise.
The McDonalds Big Mac represents this basket.
The index compares local Big Mac prices with the price of Big Macs in America. This comparaison is used to forecast what exchange rates should be, and this is then compared with the actual exchange rates to decide which currencies are over and undervalued.
Question:
- Choose the US dollar currency from the Economist's Big Mac index. Conduct a secondary research on that US dollar currency and its recent trends.
- Analyse their historical values and determine whether they have been over or undervalued based on the Big Mac index.
Related Book For
International Business The Challenges of Globalization
ISBN: 978-0133866247
8th edition
Authors: John Wild, Kenneth Wild
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