Explore BrainMass

Relative PPP

Assume that the inflation rate in the U.S. and japan are 4% and 2% , respectively and that the current spot rate is $.0083333 per Japanese yen or 120 Japanesse yen per one U.S. dollar. How much should the U.S. dollar depreciate in order to maintain purchasing power parity?

Solution Preview

Relative PPP refers to rates of changes of price levels, that is, inflation rates. This ...

Solution Summary

Relative PPP is demonstrated.