Assuming that current currencies are currently in equilibrium and the exchange rate is €/$ = 0.721 and that the U.S.expects inflation over the next year to be 4% while in Europe there is an expectation of 2.3%; what must the exchange rate be in one year? (€/$)
A) 0.709
B) 0.750
C) 0.738
D) 0.705
Correct Answer:
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