Implied PPP of the Dollar and Actual Exchange Rate

Implied PPP of the Dollar and Actual Exchange Rate Ques.: The Economist publishes every year the prices of a standard BigMac around the world. Find the BigMac prices for the USA, France, and South Korea and the corresponding (average annual) nominal exchange rates in 2006 and 2009. Calculate for each of these countries the implied PPP of the dollar 2006 and 2009 and compare this to the actual exchange rates. Can you explain the differences in implied PPP of the dollar and the nominal exchange rates? The Economists Big Mac index is an informal index sometimes used to judge whether current exchange rates between different currencies are justified and currencies are at their correct exchange rate, though it is not intended to be a precise predictor of currency movements. Now commonly known as burgernomics, it is based on the theory of Purchasing Power Parity (PPP). PPP is the notion that a dollar should buy the same amount of goods in all countries. It suggests that a long term equilibrium will adjust exchange rates such that the purchasing power or cost of traded goods and services in different countries will be the same. It is based on thelaw of one price: in ideally efficient markets, identical goods should have only one price. The Big Mac index uses the prices of McDonalds Big Mac hamburger, which is produced in about 120 countries. It assumes that the Big Mac is a similar product in each economy, wherever produced, and it is made with identical specification, thus it should have the same price everywhere. The following tables compare the Big Mac prices, nominal exchange rates and the Implied PPP for USA, France and South Korea for the year 2006 and 2009. Comparing actual exchange rates with PPPs indicates whether a currency is under- or over- valued. A countrys currency is said to be overvalued if the implied PPP is greater than the market exchange rate and it is said to be undervalued if the implied PPP is less that the market exchange rate. In accordance with the above explanation, Euro is overvalued both in 2006 and 2009 i.e. the implied PPP is more than the nominal exchange rate. The Euro has appreciated in 2009 as compared to 2006, but the nominal exchange rate should come down by about 28%(for 2009) and 19%(for 2006)to equalise with the implied PPP and thus holding the law of one price true. Whereas, the South Korean Won is undervalued both in 2006 and 2009, as implied PPP is less than the nominal exchange rate. We notice that the Won has depreciated in 2009 as compared to 2006, but the nominal exchange rate should go up by 26%(for 2009) and 17%(for 2006)to equalise with the implied PPP. The under/over valuation of Euro and South Korean Won for 2006 and 2009 is shown below: There is a difference between the nominal exchange rate and the implied PPP of the dollar as calculated using Big Mac prices. This difference can be attributed to several factors. The difference can arise largely due to factors affecting either: The implied PPP by Big Mac index Or Nominal Exchange Rate Firstly, the difference arises because the actual prices of Big Macs are not same everywhere. Many of the inputs of a Big Mac cannot be traded internationally, thus the prices of these goods may diverge substantially between countries. This effects the PPP but not the nominal exchange rate because comparisons on a purchasing-power parity (PPP) basis take account of the variations in prices of the same goods in different countries. Unlike comparisons at market exchange rates, PPP reflects the real purchasing power of each countrys residents. The Big Mac index is most useful for assessing the exchange rates of countries with similar incomes per head. It is quite natural for average prices to be lower in poorer countries than in developed ones. Non tradable inputs like labour services and property rent generally differ and are particularly cheap in poorer countries. This gives a big cost advantage in production of these goods and services. PPPs are therefore a more reliable way to derive exchange rate than market exchange rates, because cheaper prices mean that money goes further. The prevailing rates of taxes also lead to a difference in input prices and the selling price of a same commodity in different regions. The PPP model assumes that the real value placed on goods is same in different countries. But in reality, what is considered a luxury in some places might be a necessity in others. The PPP method does not take this into consideration. On the other hand, the factors which effect the nominal exchange rate are price level of the two countries in question, inflation rates, the real exchange rate etc. There factors might not always affect the PPP, thus there is a difference between the two. The above points explain the differences between implied PPP and nominal exchange rate. The believers of PPP have based their views largely on arguments relating to international goods arbitrage, which leads to equilibrium but this is not always the case. Thus Big Mac index is not a perfect measure of exchange rate. References: www.oanda.com/convert/fxhistory www.economist.com/markets/bigmac Big Mac IndexA Dictionary of Finance and Banking. Ed Jonathan Law and John Smullen. Oxford University Press, 2008.Oxford Reference Online. Oxford University Press. Big Mac IndexA Dictionary of Business and Management. Ed. Jonathan Law. Oxford University Press, 2009.Oxford Reference Online. Oxford University Press. purchasing power parityA Dictionary of Business and Management. Ed. Jonathan Law. Oxford University Press, 2009.Oxford Reference Online. Oxford University Press. purchasing power parity theory of exchange ratesThe Handbook of International Financial Terms. Peter Moles and Nicholas Terry. Oxford University Press 1997.Oxford Reference Online. Oxford University Press. Economist; 7/18/2009, Vol. 392 Issue 8640, p74 Economist; 5/27/2006, Vol. 379 Issue 8479, p74 Economist; 6/23/2007, Vol. 383 Issue 8534, p86-86. Economist; 6/5/2004, Vol. 371 Issue 8378, p98-98. Economist; 04/11/98, Vol. 346 Issue 8063. Strauss, Jack. Southern Economic Journal.Stillwater: Yr 1995. Vol. 61, Iss. 4 Mankiw and Taylor (2008), Macroeconomics

My Approach to Writing

My goals for this course is to be able to properly use quotations, paraphrase and make corrections to grammatical errors also how to utilize various research strategies and organize information is a meaningful way so that the audience can easily understand what I have written. To be able write information clearly and correctly is critical in my personal and professional life.In my professional life I do have to document on the customers account on what they called in about and the solution, the notes I place on the customer's accounts needs to be clear so that if the customer calls back in the next representative will be able to read and understand what I wrote. Same thing applies if my supervisor needs to review the notes and or the call. As a college student I am required to participate in class discussions, write and summarize essays.Since my classes are online the preferred method of communication for the professors are emails . 1 also prefer to email my supervisor with any reque sts, concerns etc , that way the requests is documented cause as human being we have a tendency to forget things so the email can be used as reference. I also have to write notes or send emails to my daughter teacher as well, so being able to write properly is critical.I set goals for writing an academic paper by first understanding who my audiences are, so that I am able to express my ideas and thoughts and findings in a way that they can clearly understand. Then I begin to plan my work which includes , creating an outline, come up with points to over and a statement of purpose, which serves as a guide before I start to research and write the paper . When the writing Is completed I revise and proof-read for any errors .Writing for other can be very challenging. It requires you to be focused and creative. My biggest challenge would be coming up with new and unique Ideas to impress or excite the audience I want to make sure that my Ideas are not something that they Eve have heard bef ore. The first couple sentences can be pretty challenging but usually once those are completed then new Ideas start flowing.

College Essay Samples for Healthcare Secrets That No One Else Knows About

College Essay Samples for Healthcare Secrets That No One Else Knows About Managed care is part of American healthcare system. As a rule you're absolutely free to decide on any topics in a specific field. It is possible to fix mistakes and better your writing in later drafts. If you neglect to adhere to the easy MLA (Modern Language Association) instructions on the best way to format your essays, the examiners will believe you don't even have the ability to follow simple instructions properly. Let it feel as if you're really passionate about what you're writing about. In order to get rid of any of the plagiarism difficulties, it's highly encouraged you do not utilize it for you own writing purposes. Facts, Fiction and College Essay Samples for Healthcare Making an essay isn't an easy job. People started to stare at me. Colleges are not searching for perfect individuals. Your college essay should contain information that relate to the instruction offered to you. Developing a fantastic college essay are able to lose its purpose in the event the content of what you've written is not what the university is asking for. Ok, I Think I Understand College Essay Samples for Healthcare, Now Tell Me About College Essay Samples for Healthcare! College years are thought to be the best years in someone's life. Not much creative skills are essential to compose such sort of College essays. Stephen connects his previous experience to his existing maturity through self-knowledge. Top College Essay Samples for Healthcare Secrets Possessing a crystal clear and structured plan is the foundation for any excellent bit of writing, and a college essay is not any different. Writing a college essay can arrive in various forms and styles based on your taste. Being in college might be a small struggle for some. One of the absolute most troublesome things in writing essays is thinking up an excellent title. The Fight Against College Essay Samples for Healthcare Thus, essays have come to be an inseparable portion of academics. There are several different sorts of essays within college essays. Before you commence writing your college essay, you might want to see the essay examplesA that we've listed for you, so you may have more idea on what things to put in the college essay which you will create. Because you are writing a college essay it isn't enough in case you write it in simple words. Before starting an essay, it's important to understand what you're writing for. The title should not simply sell your essay in a couple of words but in addition offer a notion about the most crucial point that you're going to make through the essay. No wonder it's as essential as writing the essay itself. The most suitable selection of essay topic can help you. So you don't actually need to locate a topic! When writing essays, it's simple to drift away from this issue and go offbeat. The Chronicles of College Essay Samples for Healthcare You could also pick the above mentioned topics whenever you are participating in any scholarship essay competitions. Writing skills in college isn't restricted to essays. Summer is a great time to start your college essay. Upcoming college students might also be requested to compose a college essay for a component of their first requirements. You ought to take a more strategic strategy. Outlines can also function as a brainstorming tool that can provide you a notion of what things to write about. Just a couple of steps are involved.

The Clouds, An Inconsistent Message About Morality

Aristophanes’ play, The Clouds, has an inconsistent message about morality. Morality is the difference between what is right and what is wrong. Morality affects our action, thoughts, and what is perceived as good and bad. For the ancient Greeks nomos was the concept of law and moral conduct, while physis was natural behavior. In both plays there were incidents that have a moral argument. In The Cloud, there are scenes where morality is question about what a character is doing. Compared to Euripides’ play, Electra, morality is a key issue. Some people may say that in The Clouds, the moral argument is view differently than in Electra. In this paper I will argue that the concept of what is moral is different yet the same for the characters in both plays and some characters are more vulnerable to having their sense of morality swayed. The morality of a person can be affected by the person’s circumstances. This can cause them to act in a way that they will never have acted. A person’s circumstance can affect them negatively. In The Clouds, Strepsiades was in a situation where his son, Pheidippides, had accumulated a lot of debt for him and his creditors were after him. Strepsiades, stressed and desperate about having his property taken, tried to convince his son to learn the Inferior Argument because, â€Å"†¦the Inferior Argument can debate an unjust case and win. All you have to do is learn this Inferior Arguments for me, then you can talk your way out of all the debts I’veShow MoreRelatedChristian Worldview and Multiculturalism3014 Words   |  13 Pagesinfluential group calling itself NAME, or the National Association for Multicultural Education, includes in its philosophy statement the following: Xenophobia, discrimination, racism, classism, sexism, and homophobia are societal pheno mena that are inconsistent with the principles of a democracy and lead to the counterproductive reasoning that differences are deficiencies.(name). 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