One Friday a Few Years Ago, the Big Mac Index

question 22

Multiple Choice

One Friday a few years ago, the Big Mac Index suggested that the yen was overvalued relative to the dollar by 70%. When currency markets opened on the following Monday, anyone using the Big Mac Index would conclude that the yen was only 20% overvalued relative to the dollar. What is the most likely explanation for this?

• A)Japan's Central Bank acted to prop up the yen.
• B)Inflation in Japan suddenly spiked upward.
• C)McDonald's headquarters stopped hedging.
• D)McDonald's Japan reduced the yen price of a Big Mac.
• E)McDonald's Japan increased the yen price of a Big Mac.

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Definitions:

Market Testing

The stage of the new-product development process that exposes actual products to prospective consumers under realistic purchase conditions to see if they will buy.

Business Analysis

The stage of the new-product development process that specifies the features of the product or service and the marketing strategy needed to bring it to market and make financial projections.

New-product Vitality

The measure of a company's ability to innovate and bring new products to the market successfully.

Explosive Growth

Rapid increase in sales, revenue, or market size, often experienced by companies in a short period.