The Economist magazine is famous for its publication of the Big Mac index -- a table of Big Mac' prices in different countries around the world. The use of the Big Mac allows for a highly standardized poduct sold throughout the world. Given the following abbreviated table: Country Price Big Mac China Rmb 12 Indonesia Rp 20,000
U.K. £1.25
U.S. $2.50 The current (strongly managed / fixed) exchange rate between the U.S. and China is Rmb 7.85 = $1.00. If the Chinese monetary authorities allow their currency (the renminbi / yuan) to float, would you expect the dollar to appreciate or depreciate relative to the yuan?
