Question: SECTION C: PURCHASING POWER PARITY i. Briefly explain the concept of purchasing power parity and what is implies about currency valuation. (4 marks] ii. What

SECTION C: PURCHASING POWER PARITY i. Briefly explain the concept of

SECTION C: PURCHASING POWER PARITY i. Briefly explain the concept of purchasing power parity and what is implies about currency valuation. (4 marks] ii. What is the main complication when measuring purchasing power parity and how can it be overcome? Describe the performance of PPP in relation to both floating and fixed exchange rates. [6 marks] iii. What is the Big Mac PPP Index? Why would you expect it to work well? Why would you expect it to work poorly? How has the measure performed in practice? (10 marks]

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