MXNUSD .047 in nominal currency exchange rate terms. A Big Mac costs $3.99 in the U.S....

MXNUSD .047 in nominal currency exchange rate terms. A Big Mac costs $3.99 in the U.S. and 50 Pesos in Mexico. Please select the correct answer.

	I.	The Mexican Peso in undervalued. I am better off purchasing the Big Mac in Mexico.
	II.	The Mexican Peso in undervalued. I am better off purchasing the Big Mac in the U.S.
	III.	The Mexican Peso in overvalued. I am better off purchasing the Big Mac in Mexico.
	IV.	The Mexican Peso in overvalued. I am better off purchasing the Big Mac in the U.S.

Solutions

Expert Solution

As per the exchange rate the Mig MAc should cost = 3.99 / 0.047 = 84.89 peso.

It means that the Maxican peso is overvalued and we should purchased Big Mc from Maxico itself.

Option IV is correct. The Mexican Peso in overvalued. I am better off purchasing the Big Mac in the U.S

jeff jeffy answered 2 years ago

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