Recall Application 1, "The Chinese Yuan and Big Macs," to Answer

question 59

Multiple Choice

Recall Application 1, "The Chinese Yuan and Big Macs," to answer the following questions:
-According to the application, because the actual dollar- yuan exchange rate was 6.8 yuan per U.S. dollar and the predicted purchasing power exchange rate (using the Big Mac) in China is 3.49 yuan, then:

• A) the dollar is undervalued and the Big Mac is overvalued.
• B) the dollar is undervalued.
• C) the Big Mac is overvalued.
• D) the yuan is undervalued.

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Definitions:

Proximity

A principle in psychology and social psychology stating that individuals form relationships and have affection towards those who are physically close or nearby, highlighting the importance of spatial proximity in social connections.

Birds-Of-A-Feather Effect

The tendency for individuals to associate and bond with others who are similar to themselves in terms of attitudes, values, and characteristics.

Saturation Effect

A phenomenon where, after a certain point, an increase in some stimulus does not lead to a further change in response.

Foot-In-The-Door Effect

A persuasion technique that involves getting a person to agree to a large request by first setting them up by agreeing to a modest request.