Question: Look back at the Big Mac Index in Table 20.1. Compute the level of the exchange rate that would be needed to equalize the dollar

Look back at the Big Mac Index in Table 20.1. Compute the level of the exchange rate that would be needed to equalize the dollar price of the Big Mac across all countries. State whether each currency appears to be currently overvalued or undervalued relative to the dollar, and calculate the amount (as a percentage) by which the currency would need to appreciate or depreciate in order to equalize the price of a Big Mac.

TABLE 20.1 The Big Mac Index Big Mac price in local currency Exchange rate per dollar ($) Big Mac price in dollars 4.37 7.84 4.88 United States Norway Euro area Japan Mexico China Russia South Africa India 4.37 dollars 42.96 kroner 3.61 euros 1.00 dollars/ 5.48 kroner/S 0.74 curos/S 3.51 2.90 2.57 2.43 2.03 319.62 yern 91.06 yen/S 36.95 pesos 15.99 yuan 73.02 rubles 18.37 rand 89.18 rupees 12.74 pesosS 6.22 yuan/S 30.05 rublesS 9.05 randS 53.40 rupces/S 1.67

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