Question
Suppose that the spot exchange rate between the British pound sterling and the U.S. dollar has changed from $1.3828/ at the beginning of Year 0
Suppose that the spot exchange rate between the British pound sterling and the U.S. dollar has changed from $1.3828/ at the beginning of Year 0 to $1.3158/ at the end of Year 5. Assume that the annual rate of inflation during the five-year period is 4% in the United Kingdom and 2% in the U.S., respectively. Choose a correct statement: As a result, U.S. products exported to the U.K have become more competitive vis a vis British products in terms of prices. As a result, U.S. products exported to the U.K have become less competitive vis a vis British products in terms of prices. The competitiveness between U.S. and British products in terms of prices has remained unchanged.
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