Money talk

Note: The videos have Closed Captioning. To activate it, start the video, mouse over the bottom of the video
and click on the CC icon, then select from the menu.
This week we want to explore the Law of One Price and the Theory of Purchasing Power Parity. We shall be
using the Big Mac Index developed by the Economist to help illustrate these concepts.
Assignment:
Watch the above videos, then download and review the three Exchange Rate PowerPoint presentations from
Week 2 Supplemental Resources.
Read the article from the Economist containing more recent information that the above video:
http://www.economist.com/content/big-mac-index. You can also use
https://www.statista.com/statistics/274326/big-mac-index-global-prices-for-a-big-mac/ to obtain the Big Mac
price in different countries.
Pick a currency (you can do all of the currencies listed or just pick one or pick a different currency entirely) and
solve Problem 8.2, pp. 256-257 in the text.
NOTE: To solve the problem you will need the Big Mac price in the currency you select and the current
exchange rate. You can get the Big Mac price in your currency from Step 2 and the current exchange rate from
Step 4. Do NOT use the US Dollar price of a Big Mac in your selected currency from the Step 2 or Step 3
information, they are out of date and you need current data.
To obtain the current US Dollar exchange rate with the currency you have selected go to X-Rates.com.
Do additional research as appropriate.
Answer the question: Is the currency you selected over valued or under valued? Support your view with the
data you developed using the steps above
Share your analysis and comments on the discussion board.
Remember to use citations and references.