Assume the implied PPP rate of exchange of Mexican Pesos per U.S. dollar

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January 11th, 2018

QUESTION 321. Assume the implied PPP rate of exchange of Mexican Pesos per U.S. dollar is 8.50 according to the Big Mac Index. Further, assume the current exchange rate is Peso 7.50/$1. Thus, according to PPP and the Law of One Price, at the current exchange rate the peso is:a.undervaluedb.overvalued.c.correctly valued.d.There is not enough information to answer this question.

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