 Lv 1128 points

# ian g

Questions3

Price of big mac in Hungary = 529 forints

Actual exchange rate = 204 forints / US\$

Price of big mac in Canada = C\$ 3.27

Actual exchange rate = 1.24 C\$ / US\$

Price of big mac in USA = US\$ 3.06

According to purchasing power parity, what is the predicted exchange rate between the Hungarian forint and the Canadian dollar? What is the actual exchange rate?

• ### Need help finding predicted exchange rate?

Price of big mac in Indonesia = 14,600 rupiah

Actual exchange rate = 9,541 rupiah / US\$

Price of big mac in USA = \$3.06

Predicted exchange rate = ? rupiah / US\$

The formula that i got from the textbook is:

Real exchange rate = Nominal exchange rate * Domestic price / Foreign Price

I am kind of confused. Is Nominal Exchange rate = Predicted exchange rate?

• ### if v = constant, does this mean that zero-inflation require that the rate of money growth equals to zero?

V = constant

MV = PY

M is the money supply

V is the velocity of circulation of money

P is the general price level

Y is the real value of national output (i.e. real GDP)

If yes, explain why? If no, explain what the rate of money growth should equal.