Order the answer to: In recent years, the U.S. and Chinese governments have been

Academic Help business economics Order the answer to: In recent years, the U.S. and Chinese governments have been

business economics

Order the answer to: In recent years, the U.S. and Chinese governments have been

Question In recent years, the U.S. and Chinese governments have been at odds about the appropriate value of the exchange rate between the Chinese yuan and the U.S. dollar. The United States believes that the Chinese government is holding the yuan below its true value. Can the price of a Big Mac in China shed light on this controversy? For a number of years, the magazine the Economist measured the price of a Big Mac throughout the world and used these prices to explore whether currency values were too high or too low compared to the law of one price. Table contains the results for selected countries, including China. Big Macs sell for widely different prices around the globe, as measured in dollars compared to the $3.58 price in the United States in March 2010. They are a bargain in China at $1.83, but very expensive in Switzerland at $6.16. Table also contains the market-exchange rate predicted by the theory of purchasing power parity. To obtain this exchange rate, divide the price of Big Macs in the foreign country by the dollar price. For example, for China the purchasing power exchange rate is 12.50 Chinese yuan (the price of a Big Mac in China) $3.58 (the price of a Big Mac in the United States) = 3.49 Chinese yuan per U.S.dollar
Subject business economics
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