The average inflation rate in Canada is 3% per year. It means that purchasing power of $1 decreases in one year to $0.97 and in n years – to 0.97n Calculate this decrease in time period of: a. 5 years b. 10 years c. 15 years d. 20 years

The average inflation rate in Canada is 3% per year. It means that purchasing power of $1 decreases in one year to $0.97 and in n years – to 0.97n Calculate this decrease in time period of: a. 5 years b. 10 years c. 15 years d. 20 years

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 16QA

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Definition Definition Value of one unit of currency in terms of goods and services. Purchasing power refers to the ability of money to purchase goods and services at a particular point of time. As price levels in the economy increase, the purchasing power of one unit of currency decreases and vice versa.

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