--%>
Assignment Help - homework help

Exchange rate in purchasing power parity

Question:

In June 2005, a Big Mac sold for 6,000 pesos in Colombia and $3.00 in the United States.  The exchange rate in June 2005 was 2,300 pesos per US Dollar.  So, on Big Mac purchasing power parity grounds the Colombian peso was i. ___________________________.
ii. Briefly Explain?

Answer:

At the going exchange rate, the price in Columbia is 6,000 pesos while that in US is 6,900 pesos equivalent. Therefore, Colombian peso was undervalued and it should had been 2,000 peso per US dollar.

 

   Related Questions in Business Economics

  • Q : Concepts of Economic system argues by

    For Economic system argues by Adam Smith relies heavily upon all the given concepts EXCEPT: (w) market expansion will be facilitated through capital accumulation. (x) prices will be driven to the lowest point at that production can ev

    		•
  • Q : Discuss the economic aspects of ticket

    Discuss the economic aspects of ticket scalping also identifying the gainers and losers?

    		•
  • Q : Argument by Adam Smith for a true

    Within the Wealth of Nations, argument by Adam Smith such that a nation’s true wealth is its capability to: (1) obtain stocks of financial capital. (2) inspire its people’s courage and diligence. (c) give

    		•
  • Q : Other things equal assumption helps

    Explain the statement: “The other things equal assumption helps isolate key economic relationships.”?

    		•
  • Q : Assertion for the levying of a tax on

    Use the circular flow model to confirm this assertion for the levying of a tax on air polluters?

    		•
  • Q : Problem on utility function Matt’s life

    Matt’s life is divided into two time periods, young and old, and his utility is a function of two “goods”:  consumption when young and consumption whenever old.  Consumption when young and consumption when old are both of normal goods to Ma

    		•
  • Q : Principle of comparative advantage When

    When Gene can make three pairs of cowboy boots per week or one saddle whereas Roy can make either two pairs of boots or two saddles, Gene will form boots whereas Roy makes saddles according to the: (i) Law of Occam’s Razor. (ii) Principle of comparative advantag

    		•
  • Q : Illustrate the advantage of corporate

    Illustrate the advantage of corporate form of organization?

    		•
  • Q : Distribution of endowments 1. We have

    1. We have discussed the importance of resource endowments and institutions for an economy's successful development. a. In this game, what are the resources that make up the endowments, and what defines a given player's endowment o

    		•
  • Q : How can we compute operating leverage

    How can we compute operating leverage?

    		•