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Suppose That the Price of a Big Mac Is a Good

question 485

Essay

Suppose that the price of a Big Mac is a good approximation of the price level in the country. A Big Mac costs £2 in London and $3 in New York.
a) If purchasing power parity holds, what is the exchange rate between the U.S. dollar and the British pound?
b) If the current exchange rate is $1.6 per pound, what is the dollar price of a Big Mac in London? What do you predict will happen to the exchange rate? Explain.
c) The exchange rate between the U.S. dollar and the Russian ruble is 30 rubles per dollar. If purchasing power parity holds, what is the price of a Big Mac in Moscow?


Definitions:

Cam Displacement Diagram

A graphical representation showing the movement of a cam follower over time or rotation of the cam.

Displacement

The distance and direction of an object's movement from its starting point.

Cam Displacement Diagram

Cam Displacement Diagram illustrates the movement (displacement) profile of a cam follower over one complete cycle, facilitating the design and analysis of cam mechanisms.

Cam

A mechanical component that transforms rotational motion into linear motion, or vice versa, often used in engines and various machines to drive or control motion.

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