The riyal exchange rate for 2010 if the purchasing power parity theory holds. Introduction: Relative rate of inflation: It is an economic theory that depicts the relationship between the inflation rates of two different countries over a particular time period. Purchasing power parity: It is a theory that states that whenever the purchasing powers of two different countries are the same, the exchange rates between their currencies will be in equilibrium.This theory is used to compare the income levels of different countries.

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Chapter 21, Problem 4P

Summary Introduction

To calculate: The riyal exchange rate for 2010 if the purchasing power parity theory holds.

Introduction:

Relative rate of inflation:

It is an economic theory that depicts the relationship between the inflation rates of two different countries over a particular time period.

Purchasing power parity:

It is a theory that states that whenever the purchasing powers of two different countries are the same, the exchange rates between their currencies will be in equilibrium.This theory is used to compare the income levels of different countries.

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