Suppose the current exchange rates between the US dollar ($) and the Indian rupee (INR),...
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Suppose the current exchange rates between the US dollar ($) and the Indian rupee (INR), Thai Bhat (THB) and Philippine peso (PHP) are 68.0724 INR/$, 32.1836 THB/$, and 52.3803 PHP/$, respectively. In addition, you observe that a Big Mac costs 180.00 INR in India, 119.00 THB in Thailand, and 134.00 PHP in the Philippines. If the US average price of a Big Mac is 5.28$, a) What would the Big Mac Index imply for the over- or undervaluation of these currencies vis--vis the US$? b) If you were a foreign exchange trader, what would you do in response to the answer to part a) ?
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