A Big Mac Costs 4 Jon in the Country of Jonanda

question 57

Multiple Choice

A Big Mac costs 4 Jon in the country of Jonanda, where Jon is the national currency, whereas in the country of Forunisa, where Fortan is the national currency, it costs 2.5 Fortan. If Fortan is the domestic currency, then the exchange rate is 1.60. Hence, if the exchange rate of Jon to Fortan is any greater, the Big Mac Index would state that:

• A) the currency exchange rate is likely to decrease.
• B) the Jon is overvalued.
• C) the Fortan is overvalued.
• D) the spot exchange rate is likely to decrease.

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Definitions:

Standard Deviation

A criterion for evaluating the extent of scattering or variation present in a dataset.

Probability

A quantification of the probability that a specific event will take place, commonly represented as a value ranging from 0 to 1.

Normal Model

A statistical model characterized by the normal (Gaussian) distribution, representing a bell-shaped curve where most observed data falls close to the mean.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the values in a dataset deviate from the mean.