Determine the relative rate of inflation

Reference no: EM131943148

Question: From the base price level of 100 in 1981, Saudi Arabian and U.S. price levels in 2010 stood at 350 and 100, respectively. Assume the 1981 $/riyal exchange rate was $.86/riyal. Suggestion: Using the purchasing power parity, adjust the exchange rate to compensate for inflation. That is, determine the relative rate of inflation between the United States and Saudi Arabia and multiply this times $/riyal of .86.

What should the exchange rate be in 2010? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131943148

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