Assume $1 is currently equal to £.7658. Also assume the expected inflation rate in the U.K. is 3.6 percent while it is 3.3 percent in the U.S. What is the expected exchange rate four years from now if relative purchasing power parity exists?
A) £.7750
B) £.7635
C) £.7681
D) £.7623
E) £.7567
Correct Answer:
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