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From the Big Mac Index: A Big Mac is selling on average for $3.06 in the USA and on average for EUR2.92 in European member countries. If the actual exchange rate is 1.22 USD/EUR, then, relative to its purchasing power parity, the Euro is trading at an FX rate that is: a. undervalued by about 14% b. undervalued by about 22% c. overvalued by about 14% d. overvalued by about 16%

An incomplete exchange rate pass-through

		a. Is a complete pass-through in progress
		b. Happens when there are no trade frictions between two countries
		c. Measures how FX rates are impacted by the prices or imported or exported goods
		d. Measures how prices of imported or exported goods are impacted by FX rates

1. The International Fisher Effect is

   		a. The effect of interest rates differentials on forward rates
   		b. The effect of exchange rates differentials on interest rates
   		c. The effect of interest rates differentials on spot exchange rates
   		d. The effect of exchange rates on interest rates differentials

Interest Rate Parity is

		a. The effect of interest rates differentials on forward rates
		b. The effect of exchange rates differentials on interest rates
		c. The effect of interest rates differentials on spot exchange rates
		d. The effect of exchange rates on interest rates differentials

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