Question

Show the implied national currency units per U.S. dollar for the Country of INDIA (for both the actual exchange rate and the PPP exchange rate – the PPP exchange rate shows the number of currency units that will buy 1 dollar’s worth of goods in that country). You should calculate this from per capita GDP in national currency, in U.S. $, and in U.S. $ on a PPP basis (you must show your calculations). State each of these as the number of national currency units per U.S. $ (e.g. implied actual exchange rate is 35 Thailand Baht per U.S. $). (Hint: If per capita income in Haiti is 31,000 Haiti Gourdes and it is $800 in U.S. dollars, this implies the national currency units per dollar are: 38.75 HTG per $)

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Answer 1

1)for the country of india the actual exchange rate is now 1$= 71INR. the exchange rate is determined by the demand and supply forces and are not fixed but highly volatile. almost every month the exchange rate changes.

2) talking about exchange rate in terms of ppp it implies that  it is the number of units of a country's currency required to buy the same amount of goods and services in the domestic market as a U.S. dollar would buy in the United States stated by world bank. Based on the World Bank's data on PPP, it will cost you $0.30 in India to buy a basket of goods worth $1.00.So based on that calculation and today's currency conversion rate of 71 INR/$, I would calculate the PPP exchange rate to be 71 * 0.3 = 21.3 INR/$