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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. Explain why it may make sense for the United States, Japan, and Europe to allow their mutual exchange rate to float? Answer: Even though these regions trade amid each other
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Q. Explain why in exchange rate-based stabilization plan may result in a real appreciation? Answer: annotation 8 gives three reasons: first, persistent inflation because of s
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