Exercise 18 Answers

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

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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
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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....
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This note was uploaded on 02/13/2012 for the course ECON 423 taught by Professor Vd during the Spring '08 term at UNC.

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