Question

Define the following terms: i. Purchasing power parity ii. Terms of Trade iii. Fixed Exchange Rate

Define the following terms:
i. Purchasing power parity
ii. Terms of Trade
iii. Fixed Exchange Rate

Homework Answers

Answer #1

I) Purchasing power parity (PPP) is a metric used by macroeconomic analysts that compares different countries' currencies through a "basket of goods" approach.It allows for economists to compare economic productivity and standards of living between countries.

II) Terms of trade is the ratio of an index of a country's export prices to an index of its import prices. It is the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices.

III) A fixed exchange rate is a regime applied by a government or central bank ties the country's currency official exchange rate to another country's currency or the price of gold. It’s purpose is to keep a currency's value within a narrow band.

Kindly upvote:)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Purchasing Power Parity theory defines exchange rates in terms of power to purchase in two different...
Purchasing Power Parity theory defines exchange rates in terms of power to purchase in two different countries. True or False
(a) Explain why the theory of purchasing power parity cannot fully explain exchange rate. ( 8...
(a) Explain why the theory of purchasing power parity cannot fully explain exchange rate. ( 8 marks) (b) How do the expected returns on domestic and foreign deposits affect the short-run exchange rate? Explain in terms of interest parity condition (c) How does exchange rate overshooting affect the volatility of exchange rte? ( 5 marks)
explain the difference between the real exchange rate and the purchasing power parity(PPP) exchange rate, and...
explain the difference between the real exchange rate and the purchasing power parity(PPP) exchange rate, and discuss a situation in which you would use each of these different exchange rates.
Explain the theory of purchasing power parity. Explain the limitation of purchasing power parity in fully...
Explain the theory of purchasing power parity. Explain the limitation of purchasing power parity in fully explaining exchange rate movements.
Define the following terms: (i) Isomorphic graphs (ii) Reduced incidence matrix (iii) Oriented graph
Define the following terms: (i) Isomorphic graphs (ii) Reduced incidence matrix (iii) Oriented graph
Compare and contrast interest rate parity and purchasing power parity.
Compare and contrast interest rate parity and purchasing power parity.
Purchasing power parity (PPP) is defined to be: a) The currency exchange rate between Country A...
Purchasing power parity (PPP) is defined to be: a) The currency exchange rate between Country A and Country B b) The price of a basket of goods in a particular country c) The ratio of the price of a basket of goods in Country A to the price of the same basket in Country B d) None of the above
Explain the Basic Logic of Purchasing-Power Parity (PPP) and its affect on exchange rates?
Explain the Basic Logic of Purchasing-Power Parity (PPP) and its affect on exchange rates?
Purchasing Power Parity Spot rate = 5.1 HK/NZ, Tax rates in the Hong Kong and New...
Purchasing Power Parity Spot rate = 5.1 HK/NZ, Tax rates in the Hong Kong and New Zealand are 15% and 25% respectively. New Zealand annual statistics                       Hong Kong annual statistics Interest rates   10%                                         Interest rates 8% Inflation          2%                                           Inflation 6%                                                 a. What is the best estimate of the future HK/NZ spot rate in 6 months using Purchasing Power Parity? b. If in 6 months, the actual exchange rate turns out to be 5.1 HK/NZ, which currency has...
In this question you are to assume that both purchasing power parity and interest rate     ...
In this question you are to assume that both purchasing power parity and interest rate      parity hold. I am going to give you information on current and future expected price      levels (as measured by the price of a Starbuck’s venti latte) for the United States and      Switzerland. I will also tell you what the current one-year interest rate is in the U.S.      You are to figure out what the current interest rate must be in Switzerland....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT