Question

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory. In January 2021, The Economist reported that the average price of a Big Mac in the United States was $5.66. This information is used to analyze _________.

Answer 1

The Big Mac Theory of Exchange Rates is used to analyze the accuracy of purchasing power parity theory.

Step-by-step explanation:

The Big Mac Theory of Exchange Rates is used to analyze the accuracy of purchasing power parity theory. Purchasing power parity (PPP) is a concept that considers the prices of the same goods in different countries. The theory suggests that exchange rates should adjust based on the relative prices of identical goods, such as the price of a Big Mac, to achieve parity.