Question
Economics Question on Inflation
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?
A
6%
B
3%
C
14%
D
2.5%
Answer
6%
Explanation
Solution
The correct answer is (A) : 6%.