Purchasing power parity exchange rate

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Reference no: EM132011055

A kilo of mutton costs A $10 an Australia and $8 in the U.S.A.

A) If the current spot exchange rate is 0.75 $/A$, which currency is under/over valued relative to the purchasing power parity exchange rate?

B) If inflation rates in Australia and USA are 6% and 10% respectively, what is the PPP forecasted exchange rate?

Reference no: EM132011055

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