Why is the Big Mac a good indicator of purchasing power parity?
What will be an ideal response?
The Big Mac is as close as possible to identical in every location throughout the world. Since it is not traded across borders, each price reflects location-specific economic conditions. Thus, comparison of actual to "predicted" exchange rates measures for each economy the influence of country-specific vs. global determinants of market prices.
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If a firm makes negative short run profits, it will exit the industry in the long run.
Answer the following statement true (T) or false (F)
What is the economic problem? How does a command economy solve the economic problem?
What will be an ideal response?
Which of the following is not a tool the Fed uses to manage the money supply?
A) open market operations B) setting the discount rate C) setting reserve requirements for deposits in the banking system D) expanding and contracting deposit insurance
Under a Pareto Optimum
A) it is always possible to improve someone's welfare. B) it is never possible to improve someone's welfare. C) one can only reduce someone's welfare. D) it is impossible to reduce someone's welfare.