Problem
A Starbucks coffee sells for 10 yuan in Beijing, China, and for $2 in Chicago.
a) Calculate the nominal exchange rate if the law of one price holds.
b) Assume that currently the nominal exchange rate is 7 yuan per dollar. What would be the purchasing power parity theory prediction about the future value of the nominal exchange rate?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.