In the Spot Market, $1 Is Currently Equal to £

question 76

Multiple Choice

In the spot market, $1 is currently equal to £.55.The expected inflation rate in the U.K.is 4 percent and in the U.S.3 percent.What is the expected exchange rate two years from now if relative purchasing power parity exists?

• A)£.5391
• B)£.5445
• C)£.5555
• D)£.5611
• E)£.5667

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Definitions:

Hypnotic Therapy

A treatment in which the patient undergoes hypnosis and is then guided to recall forgotten events or perform other therapeutic activities. Also known as hypnotherapy.

State-Dependent Learning

The phenomenon whereby information learned in a particular state of mind is more easily recalled when in that same state.

Social Learning Theory

A theory of learning and social behavior that posits that people learn from one another, via observation, imitation, and modeling.

Active-Avoidance Learning

A process in which an individual learns to avoid a negative outcome by performing a specific behavior.