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Purchasing Power Parity Theory using Inflation Calculator

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✖Inflation in Home Country refers to the inflation rate in the home country which impacts the performance on the home currency in the forex market.ⓘ Inflation in Home Country [Ιh]			+10% -10%
✖Inflation in Foreign Country refers to the general increase in prices of goods and services over time within that specific country's economy.ⓘ Inflation in Foreign Country [Ιf]			+10% -10%

✖Exchange Rate Factor refers to the exchange of the domestic currency for foreign currency vice versa.ⓘ Purchasing Power Parity Theory using Inflation [E_f]

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Purchasing Power Parity Theory using Inflation Solution

STEP 0: Pre-Calculation Summary

Formula Used

Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1
E_f = ((1+Ιh)/(1+Ιf))-1
This formula uses 3 Variables

Variables Used

Exchange Rate Factor - Exchange Rate Factor refers to the exchange of the domestic currency for foreign currency vice versa.
Inflation in Home Country - Inflation in Home Country refers to the inflation rate in the home country which impacts the performance on the home currency in the forex market.
Inflation in Foreign Country - Inflation in Foreign Country refers to the general increase in prices of goods and services over time within that specific country's economy.

STEP 1: Convert Input(s) to Base Unit

Inflation in Home Country: 0.39 --> No Conversion Required
Inflation in Foreign Country: 0.34 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

E_f = ((1+Ιh)/(1+Ιf))-1 --> ((1+0.39)/(1+0.34))-1

Evaluating ... ...

E_f = 0.0373134328358209

STEP 3: Convert Result to Output's Unit

0.0373134328358209 --> No Conversion Required

FINAL ANSWER

0.0373134328358209 ≈ 0.037313 <-- Exchange Rate Factor

(Calculation completed in 00.004 seconds)

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Purchasing Power Parity Theory using Inflation Formula

LaTeX Go

Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1
E_f = ((1+Ιh)/(1+Ιf))-1

What is Purchasing Power Parity?

Purchasing Power Parity (PPP) is an economic theory and a method used to compare the relative value of currencies. The basic idea behind PPP is that in the absence of transportation costs and other trade barriers, identical goods and services should have the same price when expressed in a common currency. In other words, exchange rates should adjust to equalize the purchasing power of different currencies for a given basket of goods.

How to Calculate Purchasing Power Parity Theory using Inflation?

Purchasing Power Parity Theory using Inflation calculator uses Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1 to calculate the Exchange Rate Factor, The Purchasing Power Parity Theory using Inflation formula is defined as the theory which explains exchange rate between two countries will adjust in such a way that there is no difference in the purchasing price in both home currency and foreign currency on the basis of inflation rates. Exchange Rate Factor is denoted by E_f symbol.

How to calculate Purchasing Power Parity Theory using Inflation using this online calculator? To use this online calculator for Purchasing Power Parity Theory using Inflation, enter Inflation in Home Country (Ιh) & Inflation in Foreign Country (Ιf) and hit the calculate button. Here is how the Purchasing Power Parity Theory using Inflation calculation can be explained with given input values -> 0.037313 = ((1+0.39)/(1+0.34))-1.

FAQ

What is Purchasing Power Parity Theory using Inflation?

The Purchasing Power Parity Theory using Inflation formula is defined as the theory which explains exchange rate between two countries will adjust in such a way that there is no difference in the purchasing price in both home currency and foreign currency on the basis of inflation rates and is represented as E_f = ((1+Ιh)/(1+Ιf))-1 or Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1. Inflation in Home Country refers to the inflation rate in the home country which impacts the performance on the home currency in the forex market & Inflation in Foreign Country refers to the general increase in prices of goods and services over time within that specific country's economy.

How to calculate Purchasing Power Parity Theory using Inflation?

The Purchasing Power Parity Theory using Inflation formula is defined as the theory which explains exchange rate between two countries will adjust in such a way that there is no difference in the purchasing price in both home currency and foreign currency on the basis of inflation rates is calculated using Exchange Rate Factor = ((1+Inflation in Home Country)/(1+Inflation in Foreign Country))-1. To calculate Purchasing Power Parity Theory using Inflation, you need Inflation in Home Country (Ιh) & Inflation in Foreign Country (Ιf). With our tool, you need to enter the respective value for Inflation in Home Country & Inflation in Foreign Country and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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