Question

According to PPP theory, if inflation increases substantially in Malaysia while U.S. inflation remains unchanged, the...

According to PPP theory, if inflation increases substantially in Malaysia while U.S. inflation remains unchanged, the value of the Malaysian ringgit would be expected to strengthen relative to the USD.

a. True

b. False

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

the given statement is false and according to the purchasing power parity theory if the prices of one country continuously increase when compared to that of another country then the change rate relatively depreciates on the whole and in this regard because the Malaysian Ringgit has experienced inflation increase with respect to that of United States according to PPP theory, the Malaysian Ringgit depreciates against the United States dollar and it is expected to weaken

Therefore (a) True is the answer to this question

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Malaysian Island Resort. Theresa Nunn is planning a​ 30-day vacation on Pulau​ Penang, Malaysia, one year...
Malaysian Island Resort. Theresa Nunn is planning a​ 30-day vacation on Pulau​ Penang, Malaysia, one year from now. The present charge for a luxury suite plus meals in Malaysian ringgit​ (RM) is RM1 comma 0481,048​/day. The Malaysian ringgit presently trades at RM3.13503.1350​/$. She determines that the dollar cost today for a​ 30-day stay would be ​$10 comma 028.7110,028.71. The hotel informs her that any increase in its room charges will be limited to any increase in the Malaysian cost of...
Theresa Nunn is planning a? 30-day vacation on Pulau? Penang, Malaysia, one year from now. The...
Theresa Nunn is planning a? 30-day vacation on Pulau? Penang, Malaysia, one year from now. The present charge for a luxury suite plus meals in Malaysian ringgit? (RM) is RM1 comma 040?/day. The Malaysian ringgit presently trades at RM3.1350?/$. She determines that the dollar cost today for a? 30-day stay would be ?$9 comma 952.15. The hotel informs her that any increase in its room charges will be limited to any increase in the Malaysian cost of living. Malaysian inflation...
Your firm exports goods to Japan, you need to forecast the value of JPY against the...
Your firm exports goods to Japan, you need to forecast the value of JPY against the USD –i.e., you forecast St(USD/JPY). Clearly explain how each of the following will affect appreciation/depreciation of USD against JPY. a. U.S. inflation has suddenly increased substantially, while Japan’s inflation remains low. b. U.S. interest rates have increased substantially, while Japan’s interest rates remain low. c. The U.S. income level increased substantially, while the Japan’s income level has remained unchanged. d. The U.S. is expected...
According to a textbook for relative PPP “It asserts that prices and exchange rates change in...
According to a textbook for relative PPP “It asserts that prices and exchange rates change in a way that preserves the ratio of each currency’s domestic and foreign purchasing powers. If the U.S. price level rises by 10 percent over a year while Europe’s rises by only 5 percent, for example, relative PPP predicts a 5 percent depreciation of the dollar against the euro. The dollar’s 5 percent depreciation against the euro just cancels the 5 percent by which U.S....
According to the textbook, it says that "If the U.S. price level rises by 10 percent...
According to the textbook, it says that "If the U.S. price level rises by 10 percent over a year while Europe’s rises by only 5 percent, for example, relative PPP predicts a 5 percent depreciation of the dollar against the euro. The dollar’s 5 percent depreciation against the euro just cancels the 5 percent by which U.S. inflation exceeds European inflation, leaving the relative domestic and foreign purchasing powers of both currencies unchanged." I now understand why relative PPP predicts...
Today’s spot rate of the euro is USD1.1676/EUR. Assume the relative PPP holds, the U.S. inflation...
Today’s spot rate of the euro is USD1.1676/EUR. Assume the relative PPP holds, the U.S. inflation over one year is expected to 3 percent, while the EU inflation is expected to be 2 percent. If you plan to go on vacation in Paris, France and will need 5000 euros in one year. What is the expected exchange rate of euro? What is the expected amount of dollars you need to pay for your trip in one year?
Liquidity preference theory If expected inflation falls, then, according to the liquidity preference theory and the...
Liquidity preference theory If expected inflation falls, then, according to the liquidity preference theory and the Fisher equation, demand for real money balances will A rise. B fall. C remain unchanged.
Suppose that the U.S. dollar is worth 22 Mexican pesos. According to PPP, the dollar "should"...
Suppose that the U.S. dollar is worth 22 Mexican pesos. According to PPP, the dollar "should" be worth 20 pesos. We can then say that the dollar is overvalued. a. true b. false
Klimewsky, Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only...
Klimewsky, Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Klimewsky would like you to value this target and has provided you with the following information: •             Klimewsky expects to keep the target for three years, at which time it expects to sell the firm for 500 million Malaysian ringgit (MYR) after deducting the amount for any taxes paid. •             Klimewsky expects a strong Malaysian economy. Consequently, the...
Klimewsky, Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only...
Klimewsky, Inc., a U.S.-based MNC, has screened several targets. Based on economic and political considerations, only one eligible target remains in Malaysia. Klimewsky would like you to value this target and has provided you with the following information: •             Klimewsky expects to keep the target for three years, at which time it expects to sell the firm for 500 million Malaysian ringgit (MYR) after deducting the amount for any taxes paid. •             Klimewsky expects a strong Malaysian economy. Consequently, the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT