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:

a. 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 $4.93.)
b. According to purchasing-power parity, what is the predicted exchange rate between the Hungarian forint and the Canadian dollar? What is the actual exchange rate?
c. How well does the theory of purchasing-power parity explain exchange rates?

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Predicted Exchange Actual Exchange Rate Price of a Big Mac 2,100 pesos Country Chile Hungary 900 forints Czech Republic Brazil Canada Rate pesos/$ 715 pesos/$ forints/$ 293 forints/$ korunas/$ 25.1 korunas/$ 75 korunas_ 4.02 real/$ 1.41 C$/$ real/$ 13.5 real 5.84 C$