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Please show calculations and kindly explain so that I will comprehend. Thank you. The current price level in the U.S. is $14,000 per consumption bundle,
Please show calculations and kindly explain so that I will comprehend. Thank you.
The current price level in the U.S. is $14,000 per consumption bundle, and 10,000 per consumption bundle in the U.K.. The spot rate is $1.65/E. The annual inflation rate is expected to be 2% in the U.S. and 5% in the U.K. (1) Assume depreciates against dollar by 4% in the next year. Discuss with calculations: a. The impact on GBP's purchasing power of U.S. goods in the next year b. The impact on GBP's purchasing power of U.K. goods in the next year c. Which country's competitiveness improves in the next year? Explain. (2) If there is no change to the import/export between the U.S. and the U.K. at the end of the next year, calculate the \% change of the value of USD in the next year based on relative purchasing power parity. Show both the calculation and the
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