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Question
Suppose that the U.S. dollar price of a Big Mac is $3.57. The price of a Big Mac in China is 12.5 yuan. Suppose that the current exchange rate is 6.83 yuan per dollar. If absolute PPP holds, the PPP-implied exchange rate is _______ and yuan is ________.
a. 3.50 yuan per dollar; overvalued.
b. 3.50 yuan per dollar; undervalued.
c. 1.83 yuan per dollar; overvalued.
d. 1.83 yuan per dollar; undervalued.
Answer
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Related questions
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