Look back at the Big Mac Index in Table 20.1. Compute the level of the exchange rate
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TABLE 20.1 The Big Mac Index Big Mac price in dollars Big Mac price in local Exchange rate per dollar ($) currency United States 4.93 dollars 1.00 dollars/$ 4.93 Norway 46.80 kroner 8.97 kroner/$ 5.22 Euro area 3.72 euros 0.93 euros/$ 4.00 118.65 yen/$ 17.44 pesos/$ 6.56 yuan/$ 370.00 yen 49.00 pesos 17.60 yuan Japan 3.12 Mexico 2.81 China 2.68 Russia 114.00 rubles 74.66 rubles/$ 1.53 South Africa 28.00 rand 15.81 rand/$ 1.77 India 127.00 rupees 66.80 rupees/$ 1.90
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For a Big Mac to cost the same 493 in the euro area the euro must appreciate against the dollar by 2...View the full answer
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