Question 1. PART B (4 points) The iTunes store, owned by Apple Inc. sells songs, movies and tv shows. These stores operate in several countries and the songs are priced in local currency terms. iTunes Song PPP exchange Current US$ exchange rate Over (+)/under (-) Over (+)/under (-) valuation Price Rate valuation (Local currency) (iTunes) (Big Mac)* USA US$ 0.99 Australia A$1.69 A$1.70 A$1.33 +28% -21% Canada C$0.99 C$1 C$1.12 -11% +1% Japan 200 202 112 +80% -28% UK 0.79 0.79 0.53 +51% +18% Source: The Economist What factor(s) could potentially explain the different prices charged for songs on iTunes? What advantage does the iTunes index have over the Big Mac index? (4 points; Max 200 words) Question 1. PART B (4 points) The iTunes store, owned by Apple Inc. sells songs, movies and tv shows. These stores operate in several countries and the songs are priced in local currency terms. iTunes Song PPP exchange Current US$ exchange rate Over (+)/under (-) Over (+)/under (-) valuation Price Rate valuation (Local currency) (iTunes) (Big Mac)* USA US$ 0.99 Australia A$1.69 A$1.70 A$1.33 +28% -21% Canada C$0.99 C$1 C$1.12 -11% +1% Japan 200 202 112 +80% -28% UK 0.79 0.79 0.53 +51% +18% Source: The Economist What factor(s) could potentially explain the different prices charged for songs on iTunes? What advantage does the iTunes index have over the Big Mac index? (4 points; Max 200 words)