What would the purchasing-power parity theory predict

Reference no: EM13201756

In January, 2009 the price of a Big Mac hamburger was $3.543 in the United States and 12.5 yuan in China. Furthermore, the nominal foreign exchange rate was 6.84 yuan per dollar.

a. Calculate the real exchange rate

b. If the nominal prices of Big Macs remain unchanged in both countries, what would the purchasing-power parity theory predict would eventually be: The real exchange rate and the nominal exchange rate

In 2005, The economist reported that France's real exchange rate had increased relative to Germany's real exchange rate during the preceding two years. How can this be true if both France and Germany used the euro as their currency? Explain your answer using the formula for the real exchange rate and the percentage change rule.

Reference no: EM13201756

Questions Cloud

Security concerns : Educate Joseph by developing a short research paper. Research and list some security concerns that his business should address as it considers how to develop a Web presence.

How the economist reported that frances real exchange rate : In 2005, The economist reported that France's real exchange rate had increased relative to Germany's real exchange rate during the preceding two years. How can this be true if both France and Germany used the euro as their currency.

Relation between international trade and world output : Explain the relation between international trade and world output, describe the broad pattern of international trade and what would happen if the nations of the world were to suddenly cut off all trade with one another, what products might you no lon..

Compute the length of the shortest ladder used : A gutter cleaner wants to reach a gutter 40 ft above the ground. Find the length of the shortest ladder that can be used if the steepest angle at which it can be leaned

What would the purchasing-power parity theory predict : In 2005, The economist reported that France's real exchange rate had increased relative to Germany's real exchange rate during the preceding two years. How can this be true if both France and Germany used the euro as their currency.

About the process of language acuistion : After returning a shopping trip with his mother, ;itt;e tommy reported,"i goed to the store and eated candy" why might a behaviorist such as B.F.Skinner have had some difficulty explaining tomy's incorrect grammatical construcion?

Height and intelligance relationship describe as causal : number of correct answers on a test and test score 4) number of students in a class and number of students of with brown hair

Explain the theoretical long-run effects on national saving : Although the world financial crisis of 2008-2009 began in the U.S. sub-prime mortgage market, it quickly spread around the world. Ironically, foreign assets became viewed as riskier than U.S. assets.

Federal trade commission resolved fair trade : For decades, the Federal Trade Commission (FTC) resolved fair trade and advertising disputes through individual adjudications. In the 1960s, the FTC began promulgating rules that defined fair and unfair trade practices.

User Account

All Pages