According to the theory of relative purchasing power parity, if inflation in Zana is predicted to be 9% over the next three years whereas the U

Business Dec 09, 2021

According to the theory of relative purchasing power parity, if inflation in Zana is predicted to be 9% over the next three years whereas the U.S. inflation rate will be 3%, what will be the exchange rate in three years?

Based on the answer to question above, the board wants to know whether the cedi will depreciate or appreciate. (Choose one: depreciate or appreciate) and why?

The exchange rate between the cedi and the U.S. dollar is quoted in the forex market as: U.S. $1 = ZC5.50.