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Q. Discuss the differences between Absolute PPP and Relative PPP.
Answer: Absolute Purchasing Power Parity (PPP) states that the exchange rate between two currencies equals the ratio of their price levels. Relative Purchasing Power Parity (PPP) affirms that the percentage change in the exchange rate between two currencies over a given period equals the dissimilarity between the price rises rates of those two currencies.
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Q. What is the interest parity condition? Answer: The circumstance that the expected returns on deposits of any two currencies are equal when measured in the same currency is
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Q. Should the IMF be abolished? Discuss. Answer: Arguments for eliminating the IMF must mention moral hazard and insistence on high interest rates and hasty structural
Q. How and why did Europe set up its single currency? Answer: The why part of the question is associated to large fluctuations in the exchange rates between the Europe
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