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

question 35

Multiple Choice

The "Big Mac Theory of Exchange Rates" tests the accuracy of the purchasing power parity theory.In July 2013,the Economist reported that the average price of a Big Mac in the U.S.was $4.56.In Sweden,the average price of a Big Mac at that time was 41.6 kronor.What is the "implied exchange rate" between Swedish kronor and U.S.dollars?

• A)0.11 kronor per dollar
• B)1.90 kronor per dollar
• C)9.12 kronor per dollar
• D)46.2 kronor per dollar

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