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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.
how is exchange rate determined?
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Is there is Liquidity in the international monetary system
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Q. If the central bank does not purchase foreign assets when output increases but instead holds the money stock constant, can it still keep the exchange rate fixed at E 0 ? An
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