Examlex
The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In July 2013,The Economist reported that the average price of a Big Mac in the United States was $4.56.In Switzerland,the average price of a Big Mac at that time was 6.50 Swiss francs.If the exchange rate between the dollar and the Swiss franc was 0.93 Swiss francs per dollar,explain how it would be profitable to buy Big Macs in the United States instead of in Switzerland.
Random Walk
The path of a variable whose changes are impossible to predict.
Marginal Utility
The additional satisfaction or usefulness gained from consuming one more unit of a good or service.
Risk-averse
Describes individuals or entities that prefer to avoid risk and would rather choose a certain outcome over a gamble with a potentially higher, but uncertain, return.
Diminishing Marginal Utility
An economic principle that asserts the added satisfaction a consumer gains from consuming one more unit of a good or service decreases with each additional unit consumed.
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