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Question (4). Assume that the price of the market basket in the US is $190: Part (a) In India, Srupee/$ = 46.67 and the price

Question (4).

Assume that the price of the market basket in the US is $190: Part (a) In India, Srupee/$ = 46.67 and the price of the same market basket is 12000 rupees. Calculate the real exchange rate. Does PPP hold? Is rupee undervalued or overvalued? Will rupee appreciate or depreciate?

Part (b) In Mexico, Speso/$ = 11.01 and the price of the same market basket is 1800 pesos. Calculate the real exchange rate. Does PPP hold? Is peso undervalued or overvalued? Will peso appreciate or depreciate?

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