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Suppose a year ago the exchange rate between Mexican pesos and dollars as 13.5 pesos per dollar, and that according to relative PPP the exchange
Suppose a year ago the exchange rate between Mexican pesos and dollars as 13.5 pesos per dollar, and that according to relative PPP the exchange rate was in equilibrium. Furthermore, assume that since then, Mexican inflation has been 10% while the US inflation has been 3%. If according to relative PPP the dollar is now said to be undervalued, what is a possible exchange (of pesos per dollar) consistent with this assertion? Select all that apply.
a. 10
b. 11
c. 12
d. 13
e. 14
f. 15
g. 16
h. 17
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