Suppose a Big Mac costs 3.57 dollars in the United States and 33 pesos in Mexico. Assume the actual exchange rate is 13.8 pesos per dollar. What is the implied exchange rate in pesos per dollar, and what is the long-run adjustment necessary in the exchange rate for PPP theory to hold, given constant prices of Big Macs in both countries? A. The implied exchange rate by PPP is 9.2437, so the peso should depreciate by 33.01%. B. The implied exchange rate by PPP is 9.2437, so the peso should depreciate by 49.29%. C. The implied exchange rate by PPP is 9.2437, so the peso should appreciate by 33.01%. D. The implied exchange rate by PPP is 0.10, so the peso should appreciate by 99.2%.
Already registered? Login
Not Account? Sign up
Enter your email address to reset your password
Back to Login? Click here