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Suppose the current spot exchange rate between the USD and the is $1.50/1. The inflation in the UK is 5%, and the inflation in the
Suppose the current spot exchange rate between the USD and the is $1.50/1. The inflation in the UK is 5%, and the inflation in the US is 8%. If the purchasing power parity (PPP) holds, what new spot exchange rate should result from this difference in inflation rates between the two countries? Make sure to show all work.
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