Suppose That the U

question 46

Multiple Choice

Suppose that the U.S.dollar price of a Big Mac is $3.57.The price of a Big Mac in Norway is 25 kroner.Suppose that the current exchange rate is 5.00 krone per dollar.If absolute PPP holds,the PPP-implied exchange rate is _______ and krone is ________.

• A) 5.00 krone per dollar; overvalued.
• B) 5.00 krone per dollar; undervalued.
• C) 7.00 krone per dollar; overvalued.
• D) 7.00 krone per dollar; undervalued.

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Definitions:

Festinger

Leon Festinger was a psychologist known for the theory of cognitive dissonance, which describes the discomfort felt when holding conflicting thoughts or beliefs.

Self-regulation

The process by which individuals control their own thoughts, emotions, and behaviors to pursue long-term goals.

Self-discrepancy

A psychological theory detailing the discrepancy between an individual's actual self, ideal self, and ought self.

Ought Self

An individual's representation of the attributes someone (like themselves, peers, or society) believes they should possess, often leading to motivation to meet these perceived expectations.