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5. Today, the current market exchange rate between the Mexican peso and the USD is approximately 20 pesos per dollar, while the IMF estimates
5. Today, the current market exchange rate between the Mexican peso and the USD is approximately 20 pesos per dollar, while the IMF estimates the Purchasing Power Parity rate around 10 pesos per dollar. a. What might explain the discrepancy between the market rate and the PPP rate? b. If prices in Mexico triple in the next 10 years, while they double in the United States, what would you predict to be the market rate (pesos/dollar) and the PPP rate in 10 years? Defend your answer.
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