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Q. Explain why Relative PPP is useful when comparing countries that base their price levels on different product baskets.
Answer: For instance If the U.S price level increase by 10% over a year while Europe's rises by only 5% relative Purchasing Power Parity (PPP) predicts a 5% depreciation of the dollar against the euro. This now cancels the 5% by which U.S inflation surpass European leaving the relative domestic and foreign purchasing powers of both currencies unchanged.
(E$/E,t - E$/E,t-1)/E $/E,t-1 = _US,t - _E,t among dates t and t - 1.
Relative Purchasing Power Parity (PPP) is useful when comparing countries that base their price levels on different product baskets. Relative Purchasing Power Parity (PPP) may be valid even when absolute PPP is not.
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"Although the price levels appear to display short-run stickiness in many countries, a change in the money supply creates immediate demand and cost pressures that eventually lead t
why is international trade important for south africa
Importance of International Trades : The basis of international trade is to be found in the diversity of economic resources in different countries. All countries have not been end
You can work on this on your own, or with one partner. If there are more than two names on the submitted work, then I will give a maximum grade of 60 to each person listed on the
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Explain about the Business Economists and the MNC
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