In the Spot Market, $1 Is Currently Equal to £0

question 320

Multiple Choice

In the spot market, $1 is currently equal to £0.5086. The expected inflation rate in the U.K. is 5 percent and in the U.S. 4 percent. What is the expected exchange rate one year from now if relative
Purchasing power parity exists?

• A) £.5035
• B) £.5077
• C) £.5109
• D) £.5121
• E) £.5137

Identify factors influencing the elasticity of demand, including the categorization of goods as necessities or luxuries.

Analyze the implications of elasticity on firm’s revenue and pricing strategy.

Understand the concept of income elasticity of demand.

Differentiate between inelastic and elastic demand.

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