--%>
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 : Elucidate reallocation of resources

    Elucidate reallocation of resources?

    		•
  • Q : Facts serve to sort out good and bad

    Explain the statement: “Facts serve to sort out good and bad hypotheses.”?

    		•
  • Q : Describe the duty of bondholders in a

    Describe the duty of bondholders in a bond?

    		•
  • Q : Nation’s production possibilities curve

    Suppose that, based on a nation’s production possibilities curve, for 10,000 pizzas domestically an economy must sacrifice to get the one additional industrial robot it desires, but can get that robot from another country in exchange for 9,000 pizzas. To the fol

    		•
  • Q : Define explicit cost and implicit cost

    Briefly describe the term explicit cost and implicit cost?

    		•
  • Q : Comment surpluses drives price

    surpluses drives price down,shortages drive up

    		•
  • Q : David Hume statement regarding money in

    In modern parlance, David Hume statement regarding money which is Tis none of the wheels of trade. And tis the oil, was referring to the notion that money: (i) is relatively costly to produce. (ii) facilitates divisions of labor and specialization and

    		•
  • Q : Main philosophical foundations of

    Jeremy Bentham’s musings given main philosophical foundations for: (1) the abolition of slavery. (2) syndicalism. (3) free international trade. (4) feudalism. (5) utilitarianism. Can someone explain/help me w

    		•
  • Q : State of good or service at last unit

    Which of the given describes a situation in which each good or service is produced up to the point where the last unit gives a marginal benefit to consumers equivalent to the marginal cost of producing this? w) productive efficiency.

    		•
  • Q : Programs exchanged in the market For

    For the question below, utilize the given information. The market for gizmos is competitive, with an increasing sloping supply curve and a downward sloping demand curve. With no govt. intervention, the equilibrium price is $25 and the equilibrium quantity is 10,000 gi

    		•