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

question 118

Multiple Choice

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.If the average price of a Big Mac in Canada was $4.07.In Japan, the average price of a Big Mac was 320 yen.What is the "implied exchange rate" between the yen and the Canadian dollar?

• A)0.013 yen per Canadian dollar
• B)0.99 yen per Canadian dollar
• C)78.62 yen per Canadian dollar
• D)127.18 yen per Canadian dollar
• E)130.24 yen per Canadian dollar

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