1. If the current exchange rate is 113 Japanese yen per U.S. dollar, the price of a Big Mac hamburger in the United States is $3.41, and the price of a Big Mac hamburger in Japan is 280 yen, then other things equal, the Big Mac hamburger in Japan is: A) correctly priced. B) under priced. C) over priced. D) There is not enough information to determine if the price is appropriate or not.
2. Assume the implied PPP rate of exchange of Mexican Pesos per U.S. dollar is 8.50 according to the Big Mac Index. Further, assume the current exchange rate is Peso 7.80/$1. Thus, according to PPP and the Law of One Price, at the current exchange rate the peso is: A) overvalued. B) undervalued. C) correctly valued. D) There is not enough information to answer this question.