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The following graph shows the PPP line in blue along with several hypothetical points, A through E, that represent combinations of infiation rate differentials and

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The following graph shows the PPP line in blue along with several hypothetical points, A through E, that represent combinations of infiation rate differentials and associated percentage changes in the spot rate of the foreign currency. Use the graph to fill in the table that follows For each point on the previous graph, use the table to indicate whether purchasing power parity exists, or whether purchasing power is more favorable for forelgn or domestic products: Note: Assume there are no transaction costs. The following graph plots the percentage change in the spot rate for a foreign currency along the horifontal axis, while ineasuring the infiation. rate differential (between a home country and o foreign country) afong the vertical axis. is refers to the inflation rate in the home country, whilie lis refers to the inflation rate in a foreign country On the following graph, ise the Dhe line (circle symbol) to plot the combinations of percentage change between the forelgn currency spot rate and Intilation rate differental that are consistent with purchasing power parity (PPP). The following greph shows the ppp line in blue along with several hypotheticat points, A through B, that represent combinations of inflation rate

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