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1. Use the table that follows to answer the question Suppose the cost of the market basket in the United States is Pus$190. Check to see whether PPP holds for each of the countries listed, and determine whether we should expect a real appreciation or real depreciation for each country (relative to the United States) in the long run Currency measured in FX units Per,(Epx/s Price of Market Basket in FX Real (Brazil) Cyprus (Cy£) India (rupee) Mexico (peso) 520 75 12,000 1,800 800 4,000,000 2.1893 0.45 46.6672 11.0131 South Africa (rand 6.9294 Zimbabwe (ZWS)101,347 A. Calculate the prices of U.S basket in FX (PusEFx/s) B. Calculate real exchange rate, q C. Does PPP hold? D. Is FX currency Overvalued or Undervalued? E. Is F X currency expected to have real appreciation or depreciation?
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