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Assume the spot exchange rate is 1.25 Australian dollar per U.S. dollar. If the inflation rate in the U.S. is expected to be 1.5% and

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Assume the spot exchange rate is 1.25 Australian dollar per U.S. dollar. If the inflation rate in the U.S. is expected to be 1.5% and the inflation rate in Australia is 1.2% for the next two years, then the: exchange rate will increase. exchange rate will double. U.S. dollar will appreciate relative to Australian dollar. U.S. dollar will become more valuable. Austrlian dollar will strengthen against the U.S. dollar

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