Question
I need the numerical answer to these questions. I don't need an explanation. 1)The annual interest rate in interest rate in Germany (part of Euroarea)
I need the numerical answer to these questions. I don't need an explanation.
1)The annual interest rate in interest rate in Germany (part of Euroarea) is 1%, the annual interest rate in United States is 3% and the spot exchange rate (euros per dollar) is 0.7. What is the expected spot exchange rate (in euros per dollar) after one year if the uncovered interest parity holds?
2)The exchange rate of euros per dollar is 0.8 and the exchange rate of pounds per dollar is 0.7. What should be the exchange rate of pounds per euro?
3)The current exchange rate is 1.2 US dollars per euro. What is the exchange rate after the money supply of the United States doubles and the real income in Europe doubles? You may assume that absolute purchasing power parity and quantity theory of money hold and that the other variables do not change
I need to know which answer is the right one. I don't need an explanation.
price supply 6 5 4 demand 2 3 4 6 7 8 quantityStep by Step Solution
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