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 Swiss franc's exchange rate against the Russian ruble?
What will be an ideal response?
(Eruble/franc, t - Eruble/franc, t-1)/Eruble/franc, t-1 = 2 - 0.02 = 1.98
So there will be a 198% depreciation of the ruble against the franc or, conversely, a 198% appreciation of the franc against the ruble.
You might also like to view...
As Betsy's consumption of coffee increases, her marginal utility from coffee
A) increases. B) decreases. C) remains unchanged. D) increases first and then decreases.
How has organizing a successful firm in a market economy changed over the last century?
A) There has been no change one way or the other over the last century. B) It has become more difficult to organize an efficient and successful firm. C) It has become easier as more and more firms discover how to do it. D) As government intervention has decreased, firms now have more freedom.
You've set aside $500 a month to go golfing. If each round costs $55, how many rounds of golf can you play each month?
A. 2 rounds B. 11 rounds C. 10 rounds D. 9 rounds
Refer to the information provided in Table 2.1 below to answer the following question(s). Table 2.1?KrystalMarkWriting Poems812Writing TV Commercials24Refer to Table 2.1. For Krystal, the opportunity cost of writing one TV commercial is
A. 1/4 of a poem. B. 2 poems. C. 4 poems. D. 6 poems.