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It is given that the United States has an inflation rate of 3 percent, and that the United Kingdom experiences an inflation rate of 8

It is given that the United States has an inflation rate of

3

percent, and that the United Kingdom experiences an inflation rate of

8

percent. Spot exchange rate of the British pound is $

1.93 .

According to PPP

,

how do you think that this spot rate adjusts?

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