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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 Norway is 25 kroner. Suppose that the current exchange rate is 5.00 krone per dollar. If absolute PPP holds, the PPP-implied exchange rate is _______ and krone is ________.
a. 5.00 krone per dollar; overvalued.
b. 5.00 krone per dollar; undervalued.
c. 7.00 krone per dollar; overvalued.
d. 7.00 krone per dollar; undervalued.
Answer
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Related questions
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