Currencies – U.S. dollar foreign-exchange rates. December 15, 2015
Country/currency: British Pound, Norwegian Kroner, Thai Baht in US$: 1.53468, 0.16900, 0.03100 per US$: 0.6516, 5.9173, 32.250
1. Suppose a Big Mac costs $3.27 in Boston, and 101 Thai Baht in Thailand. In this circumstance, what can we say is TRUE?
Purchasing Power Parity holds, and Big Macs are relatively cheap in Thailand
Purchasing Power Parity holds, and Big Macs are relatively expensive in Thailand
Purchasing Power Parity holds, and Big Macs cost the same in these two cities
Purchasing Power Parity does not hold, and Big Macs are relatively cheap in Thailand
Purchasing Power Parity does not hold, and Big Macs are relatively expensive in Thailand
2. Shelly is currently in Oslo’s airport, about to fly to Thailand. She has 500 Norwegian Kroner in her wallet. Which of the following comes closest to the number of Thai Baht she can receive?
A. 16,125
B. 2,725
C. 954
D. 296
E. 92
3. The price of an ounce of gold in New York is $1,000, and the price of the same ounce of gold in London (Britain) is 651.602 British Pounds. Using the exchange rates above, what would likely occur in well-functioning markets based upon this information?
The price of gold will rise in New York and fall in London
The price of gold will rise in New York and will stay the same in London
The price of gold will fall in New York and rise in London
The price of gold will fall in New York and will stay the same in London
The price of gold will stay the same in both New York and London