If the Dollar/pound Exchange Rate Is $2/£,a Big Mac Costs

question 60

Multiple Choice

If the dollar/pound exchange rate is $2/£,a Big Mac costs $5 in New York City and costs £4 in London,the pound is ________,and U.S.tourists will be ________.

• A)overvalued; better off in London
• B)overvalued; better off in New York
• C)undervalued; better off in London
• D)undervalued; better off in New York

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Definitions:

Japan

An island country located in East Asia, known for its rich cultural heritage, advanced technology, and strong economy.

European Union

is a political and economic union of 27 European countries that are bound together by various treaties aimed at enhancing economic cooperation, free movement, and common external policies.

Brazil

Brazil is a large South American country known for its diverse culture, tropical landscapes, and as an emerging market within the global economy.

Merchandise Balance

reflects the difference between a country's exports and imports of physical goods, excluding services.