Initial exchange rate of the pound

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Reference no: EM131814636

Consider the following information: USA United Kingdom Initial Inflation (i=0) 0% 0% Final Inflation (i=+1) 2% 7% Initial Exchange rate of the Pound (i=0) $1.2925/Pound Final Exchange rate of the Pound (i=+1) $1.3250/Pound Is there purchasing power parity? Why or why not? From the perspective of the US firm, where would it be cheaper to buy the goods?

Reference no: EM131814636

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