Question

According to purchasing-power parity, if it took 58 Indian rupees to buy a dollar today, but it took 55 to buy it a year ago, then the dollar has:

Answer 1

Given that,

Current exchange rate between India and U.S :

1 Dollar = Rs. 58

Exchange rate between India and U.S a year ago :

1 Dollar = Rs. 55

Above information conclude that the currency of India depreciates whereas currency of united states appreciates.

This is due to the increase in the exchange rate in India. Now, a dollar become more expensive than it a year ago.

So, the Indian rupee depreciated and U.S dollar appreciated.