Assume that the inflation rate in Singapore is 3%, while the inflation rate in the U.S. is 8%. According to PPP, the Singapore dollar should ____ by ____%.

Question

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According to Purchasing Power Parity (PPP), the currency of the country with the lower inflation rate (Singapore) should appreciate relative to the currency of the country with the higher inflation rate (U.S.). The appreciation rate is calculated as (1 + inflation rate of U.S.) / (1 + inflation rate of Singapore) - 1, which equals approximately 4.85%.

Assume That the Inflation Rate in Singapore Is 3%, While