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P19-1 Exchange rate movements Suppose a basket of goods in Paris costs 133 and the same basket purchased in New York costs $153. At what
P19-1
Exchange rate movements Suppose a basket of goods in Paris costs 133 and the same basket purchased in New York costs $153.
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At what exchange rate between euros and dollars is the cost of the basket of goods the same in each city?
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Now suppose that over the next year inflation in France is expected to be 2% while in the U.S. the forecast is for 6% inflation. What exchange rate do you expect a year from today?
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