a. Suppose that the price level in the United States doubled, while the price level in the

Question:

a. Suppose that the price level in the United States doubled, while the price level in the U.K. remained unchanged. According to purchasing power parity theory, would the dollar/pound nominal double or would it fall in half?
b. In practice, PPP tends to hold more true in the long run than in the short run, because many prices are sticky. So if the U.S. money supply increased dramatically—a big enough rise for the price level to double in the long run—would this be good news for British tourists headed to the United States or would it be good news for U.S. tourists headed to Britain? Incidentally, would this be good news or bad news (in the short run) for U.S. tourists staying in the United States? Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...