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

question 56

Multiple Choice

The "Big Mac Theory of Exchange Rates" tests the accuracy of the purchasing power parity theory.In July 2011,the Economist reported that the average price of a Big Mac in the U.S.was $4.07.In Mexico,the average price of a Big Mac at that time was 32 pesos.What is the "implied exchange rate" between the peso and the dollar?

• A) 1.30 pesos per dollar
• B) 4.17 pesos per dollar
• C) 7.86 pesos per dollar
• D) 12.72 pesos per dollar

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Definitions:

Fatigue

A state of increased tiredness or exhaustion, typically resulting from physical or mental exertion.

Paradoxical Sleep

Also known as REM sleep, a unique phase of sleep in mammals and birds, characterized by rapid eye movements, low muscle tone, and dreams.

Circadian Rhythm

The inherent, internal mechanism that controls the cycle of sleep and wakefulness, recurring approximately every 24 hours and affecting physiological, cognitive, and behavioral alterations.

Chronic Sleep Debt

The cumulative effect of not getting enough sleep on a regular basis, leading to significant physical and psychological health issues.