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Question
Which formula represents Exchange Rate (PPP)?
Options
\[\text{Exchange Rate (PPP)}=\frac{\text{Foreign Price}}{\text{Domestic Price}}\]
\[\text{Exchange Rate (PPP)}=i_A-i_B\]
\[\text{Exchange Rate (PPP)}=\frac{\text{Domestic Price}}{\text{Foreign Price}}\]
\[\text{Exchange Rate (PPP)}=\text{Domestic Price}+\text{Foreign Price}\]
MCQ
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Solution
The PPP exchange rate is calculated by dividing Domestic Price by Foreign Price. Thus, \[\text{Exchange Rate (PPP)}=\frac{\text{Domestic Price}}{\text{Foreign Price}}\].
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