Purchasing Power Parity If the current spot rate between the U.S.dollar and the Netherland Antilles guilder was $1 = 1.54 guilder,and if the inflation rate in the United States was 2 percent and in the Netherland Antilles it was 8 percent,then what would be the expected spot rate in one year?

Question

Quizplus · Accepted Answer

The correct answer is A because the expected spot rate in one year can be calculated using the formula: Expected spot rate = Current spot rate * (1 + Inflation rate in the US) / (1 + Inflation rate in the Netherland Antilles). Plugging in the given values, we get: Expected spot rate = 1.54 * (1 + 0.02) / (1 + 0.08) = 1.54 * 1.02 / 1.08 = 1.4476.

Purchasing Power Parity If the Current Spot Rate Between the U.S.dollar