Argentine Float. The Argentine peso was fixed through a currency board at $Ps\frac{1\mathrm{.}00}{\text{\$}}$ throughout the $1990$ s$.$ In

January $2002,$ the Argentine peso was floated. On January $29,2003,$ it was trading at Ps$3\mathrm{.}18/$$$.$ During that one$-$year

period, Argentina's inflation rate was $19\%$ on an annualized basis. Inflation in the United States during that same period was

$2\mathrm{.}5\%$ annualized.

a$.$ What should have been the exchange rate in January $2003$ if PPP held?

b$.$ By what percentage was the Argentine peso undervalued on an annualized basis?

c$.$ What were the probable causes of undervaluation?

a$.$ What should have been the exchange rate in January $2003$ if PPP held?

The exchange rate in January $2003,$ if PPP held, should have been Ps $/$$$.($Round to five decimal places.$)$

b$.$ By what percentage was the Argentine peso undervalued on an annualized basis?

On an annualized basis, the Argentine peso was undervalued by $\%.($Round to three decimal places and include a

negative sign if needed.$)$

c$.$ What were the probable causes of undervaluation? $($Select the best choice below.$)$

A$.$ The rapid decline in the value of the U$.$S$.$ dollar was a result of not only inflation, but also a severe crisis in the

balance of payments.

B$.$ The rapid decline in the value of the Argentine peso was a result of not only inflation, but also a severe crisis in

the balance of payments.

C$.$ The rapid increase in the value of the U$.$S$.$ dollar was a result of not only inflation, but also a severe crisis in the

balance of payments

D$.$ The rapid increase in the value of the Argentine peso was a result of not only inflation, but also a severe crisis in

the balance of payments.