The "Big Mac Theory of Exchange Rates" Tests the Accuracy

question 252

Multiple Choice

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In January 2017,The Economist reported that the average price of a Big Mac in the United States was $4.93.In India,the average price of a Big Mac at that time was 178 rupees.What is the "implied exchange rate" between the rupee and the dollar?

• A)0.04 rupees per dollar
• B)36.11 rupees per dollar
• C)60.47 rupees per dollar
• D)877.54 rupees per dollar

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