Question 1. The big Mac index computed by the Economics has consistently found the U.S dollar to be undervalued against some currencies and overhauled against others. This findings seems to call for a rejection of the purchasing power parity theory. Explain why this index may not be a valued test of the theory.
Question 2. Why would China want its own currency to be undervalued relative to the U.S? How does China maintain an undervalued currency?