3. Use the table that follows to answer this question. Treat the country listed as the home country, and treat the United States as the foreign country.Suppose the cost of the market basket in the United States is P_US=$190.Check to see whether the Purchasing Power Parity (PPP) holds for each of the countries listed, and determine whether the FX currency is overvalued or undervalued. Also assume that PPP holds in the long run, so that any deviations from PPP would be expected to disappear. Then determine whether we should expect a real appreciation or real depreciation for each country (relative to the United States) in the long run. For the answer, create a table similar to the one shown and fill in the blank cells.

(Hint: Toobtain the price of market basket in US$ (in column 3), you divide the price of market basket (in FX) in column 2 by the exchange rate E_FX/$ in column 1. To compute real exchange rate, q_us/COUNTRY, you divide the price of market basket in US$ in column 3 by P_US= $190.)

Home country (currency measured in FX units)	Per $, EFX/$	Price of market basket (in FX)	Price of market basket in US$	Real exchange rate, qus/COUNTRY	Does PPP hold? (yes/no)	Is FX currency overvalued or undervalued? By how much (in percentages)?	Is FX currency expected to have a real appreciation or depreciation?
Brazil (real)	4.07	880
India (rupee)	68.51	12,000
Mexico (peso)	18.89	1,800
South Africa (rand)	15.78	800
Zimbabwe (Z$)	101,347	4,000,000