Problemon average the cost of a big mac in the us is 462, Ask an Expert

Finance

Problem:

On average, the cost of a Big Mac in the U.S. is $4.62 (Feb 2014) If purchasing power parity holds, how much should the Big Mac cost in China if the exchange rate is $1 = 6.14?

The actual average price of a Big Mac in China is approximately 16.6 RMB.

Question: How do you explain the difference between the price implied by PPP and the actual price? Please provide step by step solution and show all work.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91145782

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