Exercise 18 Answers

Exercise 18 Answers - Chinese yuan is 44% undervalued but...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
ECON 423 Example 18 1. How is the PPP exchange rate calculated for Argentina? 20 Peso/$4.07 = 4.92 2. How is the raw index overvaluation/undervaluation calculated for Argentina? (PPP-e)/e = (4.92-4.13)/4.13 = 0.19 3. What argument does the Economist article use to make a case that the Chinese yuan is not undervalued? When the PPP exchange rate is adjusted for differences in GDP between China and the U.S., the under/overvaluation of yuan changes from -0.44 to 3. With the raw index, the
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chinese yuan is 44% undervalued but is just a bit overvalued when adjusted for GDP per person. The GDP adjusted index is a better measure and it implies that undervaluation of yuan is not really present. 4. For which of the countries in the sample do you see a decrease in the overvaluation/undervaluation (negative value for GDP adjusted index raw index)? Is this what you expected? Explain. Norway, Denmark, Sweden, Switzerland and Australia....
View Full Document

Ask a homework question - tutors are online