1. The Big Mac Index has some significant explanatory value in predicting long-term exchange rates. But all of the following are weaknesses of relying solely on the Big Mac Index to predict long-term exchange rates EXCEPT: (pick one)

________ It leaves out the role of tax differences across countries.

________ It leaves out the role of land cost differences across countries.

________ It is erroneous to rely on such a simple commodity to begin to assess the value of a country's currency.

________ It leaves out the role of differences in corruption across countries.

________ It leaves out the role of differences in consumer tastes across countries.

2. A British company that relies on its extensive foreign direct investments in the U.S. for its profitability will see the following effect on its bottom line, all else equal, from the very recent collapse of the British pound relative to the U.S. dollar:

________ That British company will be hurt by strategic exposure.

________ That British company will be helped in this case by translation exposure.