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If India's annual inflation is 6% and US inflation is 2%, PPP predicts INR will depreciate by approximately:
A4% per year
B2% per year
C8% per year
D6% per year
Answer & Solution
Correct answer: A. 4% per year
1. Identify what the question asks: this concept maps to pppinflation (§8.2).
2. Apply the framework or formula relevant to the topic.
3. Eliminate distractors and arrive at the correct option (A).
_Source: ICAI BoS CA Final Paper 2, Ch 10 "Foreign Exchange Exposure and Risk Management"_
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