Solution-Determining the current exchange rate

Determining the current exchange rate

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Reference no: EM131108075

The exchange rate between the United States of Albion (U.S.A.) and the Republic of Oz is now 1:1 with in?ation in both countries expected to be 2% and interest rates 4%.

(a) What does PPP imply about the exchange rate in 20 years time?

(b) If in?ation in the U.S.A. increases to 3% how does your answer change?

Reference no: EM131108075

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Determining the current exchange rate

Reference no: EM131108075

Reference no: EM131108075

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