Suppose the peso price of a dollar was 25P/$ in 2012 and 28P/$ in 2013. The price index for Argentina (with a base year of 1990) was 150 in 2012 and 175 in 2013. The price index for the US (with a base year of 1990) was 130 in 2012 and 140 in 2013.
How much inflation did Argentina experience between 2012 and 2013?
How much inflation did the US experience between 2012 and 2013?
According to relative PPP, how much and in which direction should the P/$ exchange rate change? Explain.
How much did the nominal exchange rate change (%terms)? Does relative PPP hold? Explain.