Economics · International Trade & Exchange Rates

According to the absolute version of Purchasing Power Parity (PPP) theory, if a basket of goods costs ₹ 5,000 in India and $ 100 in the USA, what should be the equilibrium exchange rate?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1₹ 40 per dollar
2₹ 60 per dollar
3₹ 50 per dollar✓
4₹ 45 per dollar

Correct answer

₹ 50 per dollar

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According to the absolute version of Purchasing Power Parity (PPP) theory, if a basket of goods costs ₹ 5,000 in India and $ 100 in the USA, what should be the equilibrium exchange rate?

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According to the absolute version of Purchasing Power Parity (PPP) theory, if a basket of goods costs ₹ 5,000 in India and $ 100 in the USA, what should be the equilibrium exchange rate?

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