1a. New Zealand is a small economy. Its currency is the Kiwi. The exchange rate with the U.S. dollar 1.60 dollar per Kiwi. Absolute Purchasing Power Parity (PPP) held perfectly. The price indexes for a basket of goods and services are equal to 300 in the United States and 200 in New Zealand. What should the current exchange rate be if absolute PPP prevailed?

1b. Will the Kiwi appreciate or depreciate according to absolute PPP?

1c. One-year nominal interest rates are equal to 5% in both countries. If you think that the exchange rate will revert towards its PPP value, should you buy Kiwis, sell Kiwis, do nothing or not enough information?