The table below shows values for the consumer price indexes (CPI) of the US, UK and South
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Question:
The table below shows values for the consumer price indexes (CPI) of the US, UK and South Africa in 2016 and 2020
US | UK | SA | |
Currency | $ | pound | ZAR |
CPI 2016 | 240 | 120 | 100 |
CPI 2020 | 260 | 109 | 117 |
Their currencies are also indicated as the dollar, Pound and Rand respectively. Suppose that exchange rates in 2016 were:
dollar/pound | pound/rand | dollar/rand | |
2016 exchange rates | 1.2330 | 16.7399 | 13.6318 |
Calculate the exchange rates for 2020, assuming that the Purchasing power parity theory holds:
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