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a ) Explain the theory of purchasing power parity ( PPP ) . Based on this theory, what is a general forecast of the values
a Explain the theory of purchasing power
parity PPP Based on this theory, what is a
general forecast of the values of currencies in
countries with high inflation?
marks
b Today's spot rate of the Ghana Cedi is
$ Assume that purchasing power parity holds.
The US inflation rate over this year is expected to
be percent, while Ghana's inflation over this year
is expected to be percent. E Company Ltd is a
Ghanaian company it plans to import from the
United States and will need million US dollars
in year. Determine the expected amount of cedis
to be paid by the E Company Ltd for US dollars
in year. Please take Ghana as the home country
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