Question:
Suppose the expected rate of inflation in India is 10% whereas that in US is 4%. What is the expected rate of depreciation of Indian rupee vis-a-vis US Dollar, according to the relative purchasing power parity theory?
Suppose the expected rate of inflation in India is 10% whereas that in US is 4%. What is the expected rate of depreciation of Indian rupee vis-a-vis US Dollar, according to the relative purchasing power parity theory?
Updated On: Mar 10, 2025
- 6%
- 3%
- 14%
- 2.5%
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The Correct Option is A
Solution and Explanation
The correct answer is (A) : 6%.
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Top Questions on Inflation
- Arrange the following as steps taken by Central Bank to control the problem of inflation in India through its monetary policy.
A) Commercial Banks will increase their lending rate
B) Borrowing requirements will fall
C) Increase in repurchase agreement rate
D) Reduction of demand for goods and services at macro level
E) Income generation will slow down
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