SAR HS 325 Lecture Notes - Lecture 10: Hong Kong Dollar, United States Dollar
1 May 2018
School
Department
Course
Professor
Small Group Discussion: Coke
• What is the meaning of the 1950 Time Magazine Cover?
o As Coke became an international product, it became an integral one to every
country. It helped stimulate development, economic growth and profits and was
seen as a generally positive thing.
• How has the relationship between Coke and developing countries changed between
1950s and today?
o Before, it was seen as a symbol of luxury and the ability to buy an expensive
product.
o Presently, it is seen as a symbol of unhealthiness, a replacement for lack of clean
water, environmental problem.
▪ Essentially this is a western ideology, due to soda taxes and the current
health movement
• How does “big business” influence developing countries?
o Arguments:
▪ Is it Coke’s ethical responsibility to continue production which will
subsequently cause lower developed countries to prioritize Coke over
water (and their lack of it)?
The Big Mac Index
• An informal way to measure the purchasing power parity (PPP) between nations
o Essentially compares different countries’ currencies by pricing out a “basket of
goods” in each country
o Named because it uses the price of a McDonald’s Big Mac as a benchmark
• ex: Hong Kong big mac price = $2.19 which is 50% of the price of a U.S. big mac price =
$4.37
o Thus, the Hong Kong dollar is 50% undervalued relative to the U.S. dollar on a
PPP basis
▪ When the exchange rate of dollars and another form of currency is greater,
the big mac index shows that the other form of currency is overvalued
▪ When the exchange rate of dollars and another form of currency is lower,
the big mac index shows that the other form of currency is undervalued
• Pros
o Based on a single, standardized consumer product
o This is a simple method to help understand exchange rates
• Cons
o Western fast food can be a luxury and therefore very expensive
o Competitive markets can increase/decrease prices for a big mac
o Does not take into account difference in transportation costs, taxes and tariffs
Globalization – a historical process as the result of human innovation and technological progress
• Involves the increasing integration of economies around the world by the movement of
goods/services/capital across boarders
o Sometimes there can be movement of people (labor) and knowledge (technology)
across boarders
• There are broader cultural/political/environmental dimensions of globalization
find more resources at oneclass.com
find more resources at oneclass.com
