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Author Question: The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory. In July ... (Read 350 times)

bobbie

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on: Mar 16, 2019

Question 1

How does an increase in government purchases financed by an increase in the deficit affect exchange rates? Support your answer with graphs of the loanable funds market and the foreign exchange market.



Question 2

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory. In July 2015, the Economist reported that the average price of a Big Mac in the United States was $4.79. In Mexico, the average price of a Big Mac at that time was 49 pesos. If the exchange rate between the dollar and the peso was 13.60 pesos per dollar, how would purchasing power parity predict the exchange rate will change in the long run? Support your answer graphically.

Macroeconomics ¦ Hubbard, O'Brien ¦ 6th Edition
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Marked as best answer by bobbie on Mar 16, 2019

ambernicolefink

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Reply #1 on: Mar 16, 2019
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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bobbie

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Reply 2 on: Mar 16, 2019
YES! Correct, THANKS for helping me on my review

epscape

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Reply 3 on: Yesterday
:D TYSM

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