Assignment Instructions/ Description
Review the concept of Purchasing Power Parity in the textbook and in this article. Using the Consumer Price Index choose one product for each category. Then create table (using Excel) and compare price of the particular product in the U.S. to the same product in the country you have been assigned.Sum up all prices in each country. Then, using the current exchange rate (list the rate you will use), apply the Purchasing Power Parity theory and list any differences on the table in the last column.Summarize your findings.Step by step instructions:1. Find the consumer price index categories and subcategories by going to theCPI website (above) or by using a search engine of your choice.2. Create a basket of goods/services by picking one (1) item from each category and search the current price in the United States and in your target country. List the prices in the spreadsheet. You should have a total of about 12 goods/services.3. List the current exchange rate and use that rate to convert the target country's price into U.S. Dollars and list it in the spreadsheet.4. Record any discrepancy.5. List if the foreign currency is overvalued or undervalued and by how many percent.6. Summarize your conclusion based on what you found out including possible reasons for PPP.7. Put all your information in an Excel or Google Sheets spreadsheet.8. List all references including pricing references.Note: Your spreadsheet should have the same columns as this sample.Product Caterory/SubcategoryU.S. PriceEU PriceExchange RateEU Pricein $PPP Difference over/undervalued€1 - $1.06
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