answer and explain

Question 2 Suppose the following is true at t=0: 1. Let Es/e = 1.65 A reference basket of goods and services costs $1500 in Australia The same basket costs (1000 in Europe The violation of absolute PPP is only due to transportation costs that do not change over time The market expects the same basket to cost $1725 in Australia in a year's time The market expects the spot rate to be Es/e = 1.7325 in a year's time Which of the following is true? A. The market expects the basket to cost (1000 in Europe in a year's time. B. The market expects the basket to cost (1150 in Europe in a year's time. C. The market expects the basket to cost (1100 in Europe in a year's time. OD. The market expects the basket to cost (1050 in Europe in a year's time. E. The market expects the basket to cost (900 in Europe in a year's time