In July 2014 the price of a Big Mac was $4.80 in the United States, while in China it was only $2.73 at market exchange rates. So the “raw” Big Mac index says that the yuan was under-valued by 43% at that time. How would domestic inflation in China affect the Big Mac Index?

a. The Big Mac Index would indicate that the Chinese currency is less under-valued.

b. The Big Mac Index would indicate that the Chinese currency is more under-valued.

c. The Big Mac Index is not affected by inflation.

d. The Big Mac Index would indicate that the Dollar is more under-valued.