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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. What can one learn from the following figure? Answer: The figure shows the U.S. current account as well as net foreign wealth from 1977 until 1996. It illustrate that a
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