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Unformatted text preview: linearization which the `inflation difference' implicitly assumes). Answers which are approximate --- as in my above verbal explanation --- should be penalized lightly -- 2 marks only. The question, and the associated problem set from which it derives, asks for exact calculations, but approximate ones that show an understanding of the essence of the PPP idea are almost fine. <== this is the ratio of base year prices, P_b/P^*_b...
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- Spring '08
- Exchange Rate, Inflation rates, United States dollar, U.K, nominal exchange rates, inflation difference