Question: According to purchasing power parity, given that Australia and China are running annual inflation rates at 3% and 5.

Question:According to purchasing power parity, given that Australia and China are running annual inflation rates at 3% and 5.5% this year, respectively, the value of the     Australian dollar in terms of the Chinese currency will change. Assuming purchasing        power parity, which of the following implies that Australia will gain export           competitiveness against China?

a.       Australian dollar appreciates by 2.43%

b.       Australian dollar appreciates by more than 2.43%

c.       Australian dollar appreciates by less than 2.43%

d.       None of the above

Ans: C

Explain please why is it less than 2.43 how to get 2.43