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Exchange rate movement Suppose a basket of goods in Paris cost 133 euros and the same basket purchased in New York cost $153. A. At
Exchange rate movement
Suppose a basket of goods in Paris cost 133 euros and the same basket purchased in
New York cost $153.
A. At what exchange rate between euros and dollars is the cost of the basket of goods the same in each City?
B. Now suppose that over the next year inflation in Franceis expected to be 2% while in the US the forecast is for 6% inflation. What exchange rate do you expect a year from today?
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