Question
A) Assume the current spot rate between the UK and the U.S. is 0.726 per $1, the expected inflation rate in the U.S. is 2.65
A) Assume the current spot rate between the UK and the U.S. is 0.726 per $1, the expected inflation rate in the U.S. is 2.65 percent, and the expected inflation rate in the UK is 3.93 percent. If relative purchasing power parity exists, what will the exchange rate be 5 years from now
B) Assume the current spot rate between the UK and the U.S. is 0.752 per $1, the expected inflation rate in the U.S. is 2.03 percent, and the expected inflation rate in the UK is 3.46 percent. If relative purchasing power parity exists, what will the exchange rate be next year?
*Please answer both parts*
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Understanding The Finance Of Welfare
Authors: Howard Glennerster
2nd Edition
1847421091, 978-1847421098
