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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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Describe and explain the relationship between expected inflation rates in two countries and their interest rate differential according to the PPP theory. Answer: Expected pric
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Q. Suppose the relative price of good 1 falls relative to the price of. What happens to the wage rate? Answer: The labour component of the price of 1 is bigger than that of p
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Explain how the money markets of two countries are linked through the foreign exchange market. Answer: The financial policy actions by the Fed affect the U.S. interest rate al
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Q. Countries do not in fact export the goods the H.O. theory predicts. Discuss. Answer: This statement isn't true that though one may find several cases where it seems to be
Q. Suppose Russia's inflation rate is 200% over one year, but the inflation rate in Switzerland is only 2%. According to relative PPP, what should happen over the year to the Swis
Q . Now the monopolist discovers that it will export as much as it likes of its steel at the world price of $5/ton. It will thus expand for- export production up to the point whe
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