Assume You Can Currently Exchange $100 for €80

question 45

Multiple Choice

Assume you can currently exchange $100 for €80.25.The inflation rate in Europe is expected to be 1.8 percent as compared to 2.4 percent in the U.S.Based on relative purchasing power parity, what should the exchange rate be four years from now?

• A)€.8219/$1
• B)€.8014/$1
• C)€.7970/$1
• D)€.8073/$1
• E)€.7834/$1

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Definitions:

Total Revenue

The total financial gain a business achieves through its transactions of selling products and providing services during a specified period.

Marginal Revenue

Marginal Revenue is the additional income earned by a firm for selling one more unit of a good or service.

Quantity Sold

The number of units of a product or service that have been purchased by consumers over a specific period.

Perfect Price Discrimination

A pricing strategy where a seller charges the highest price that each consumer is willing to pay, effectively capturing all consumer surplus as profit.