In practice, people often use The Big Mac index, which provides an interesting perspective into the determination of foreign exchange rates; in Canada, a Big Mac is selling at C$6.06, while it costs P200.60 in the Philippines. The official exchange rate is C$1 = P36.94.

If the purchasing power of parity (PPP) is considered, is the peso overvalued or undervalued? 

What will be your answer if Big Mac costs P225 in the Philippines?

Answer rating: 100% (QA)

Answer Solution i Using the purchasing power of parity o... View the full answer