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Suppose that the current spot exchange rate of U.S. dollars for Russian rubles is $0.15/1ruble. The price of Russian-produced goods increases by 8 percent, and
Suppose that the current spot exchange rate of U.S. dollars for Russian rubles is $0.15/1ruble. The price of Russian-produced goods increases by 8 percent, and the U.S. price index increases by 3 percent. According to Purchasing Power Parity (PPP) Theory, the 8 percent rise in the price of Russian goods relative to the 3 percent rise in the price of U.S. goods results in the new exchange rate=
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