Homework Help: econ

Posted by wilde on Sunday, May 25, 2008 at 10:43am.

T or F, and a little explanation would be helpful.

Relative PPP (purchasing power parity) is a better approximation of reality when one of the two countries is suffering hyperinflation and the other is not.

econ - drwls, Sunday, May 25, 2008 at 12:20pm
Better than what?

Relative purchasing power (of the respective currencies) is something that can be measured, and is therefore "real". That number will change rapidly with the hyperinflation.

You can also express "relative purchasing power" in terms of an unit of work, and that number should be more stable with time.

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