COST OF A BIG MAC IN 2009 FULL
in economics from MIT, he began teaching at Harvard in 1985 and was promoted to full professor in 1987. He began his study of economics at Princeton University, where he received an A.B. Gregory Mankiw is Professor of Economics at Harvard University. Worth Publishers 41 Madison Avenue New York, NY 10010 Photo by Deborah Mankiw Printed in the United States of America First Printing 2009 Senior Publishers: Catherine Woods and Craig Bleyer Senior Acquisitions Editor: Sarah Dorger Senior Marketing Manager: Scott Guile Consulting Editor: Paul Shensa Senior Development Editor: Marie McHale Development Editor: Jane Tufts Assistant Editor, Media and Supplements: Tom Acox Associate Managing Editor: Tracey Kuehn Project Editor: Dana Kasowitz Art Director: Babs Reingold Cover and Text Designer: Kevin Kall Production Manager: Barbara Anne Seixas Composition: TSI Graphics Printing and Binding: RR Donnelley Cover art: Barbara Ellmann WHAT’S YOUR ANGLE? Encaustic on Wood Panel 24'' x 24'' © 2005 Library of Congress Cataloging-in-Publication Number: 2009924581 ISBN-13: 978-1-4292-1887-0 ISBN-10: 1-4292-1887-8 © 2010, 2007, 2003 by N. If Big Macs were a durable good that could be costlessly transported between countries, which of the following would present an arbitrage opportunity? Check all that apply.MACROECONOMICS N.
This change would mean that the euro had _ against the dollar. The exchange rate that would have equalized the dollar price of a Big Mac in the United States and the Euro area (that is, the PPP exchange rate for Big Macs) is _. Dollars per British pound)PPP Exchange Rate (U.S. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in the United States by the price in the United Kingdom: citizen would need to be able to convert $5.74 into exactly GBP 3.29. For the dollar price of a Big Mac to be the same in both countries, a U.S. Purchasing-power parity (PPP) theory states that exchange rates would need to equalize the prices of goods in any two countries. Place Local Price (their currency) Actual Exchange Rate ($/unit of their currency) Dollar Price ($) Note: Round your answers to the nearest cent. The dollar price of a Big Mac purchased in the United Kingdom was, therefore, computed as follows:ĭollar price of a Big Mac in the United KingdomDollar price of a Big Mac in the United Kingdom = GBP 3.29×$1.25GBP 1.00GBP 3.29×$1.25GBP 1.00 = $4.11$4.11įor the price you paid for a Big Mac in the United States, you could have purchased a Big Mac in the United Kingdom and had some change left over for fries!Ĭomplete the final column of the table by computing the dollar price of a Big Mac for the countries where this amount is not given. The actual exchange rate between the British pound and the U.S. At the time of the data collection, a Big Mac would have cost you $5.74 in the United States and GBP 3.29 in the United Kingdom. Using data from The Economist's Big Mac Index for 2019, the following table shows the local currency price of a Big Mac in several countries as well as the actual exchange rate between each country and the United States. dollar-Japanese yen rises from $0.009126 to $0.0109512 per Japanese yen, the Japanese yen _ in value, or _, relative to the U.S.
If the nominal exchange rate for the U.S. Suppose that on June 13, 2019, an ornamental bookcase handmade in the United Kingdom is priced at GBP 570. Use the information in the table to answer the questions that follow.įoregin Currency Cost of One Unit of Foreign Currency ($) Suppose the following table presents nominal exchange rate data for June 13, 2019, in terms of U.S. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. The nominal exchange rate is the price of one currency in terms of another currency.