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Suppose Russia's Inflation Rate Is 200% Over One Year but the Inflation

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Essay

Suppose Russia's inflation rate is 200% over one year but the inflation rate in Switzerland is only 2%. According to relative PPP, what should happen over the year to the Swiss franc's exchange rate against the Russian ruble?


Definitions:

FICA Withholding

Taxes deducted from employees’ paychecks for Social Security and Medicare, based on the Federal Insurance Contributions Act.

Federal Income Tax

The tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.

FUTA Taxes

Federal Unemployment Tax Act (FUTA) taxes are federal employer taxes that contribute to state workforce agencies to fund unemployment benefits.

Tax Liability

The total amount of tax owed by an individual, corporation, or other entity to a taxing authority.

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