The Current Spot Rate Between the U

question 7

Multiple Choice

The current spot rate between the U.K. and the U.S. is £0.6764 per $1. The expected inflation rate in the U.S. is 1.8 percent. The expected inflation rate in the U.K. is 3.4 percent. If relative purchasing power parity exists, what will the exchange rate be 2 years from now?

• A) £0.6549/$1
• B) £.0.6656/$1
• C) £.0.6872/$1
• D) £0.6982/$1
• E) £.5331/$1

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Definitions:

Embryonic Stage

The period in prenatal development from the second to the eighth week after fertilization, during which major organs and structures of the organism begin to develop.

Fetal Stage

The developmental period in pregnancy from the ninth week after fertilization until birth, when significant growth and maturation of the fetus occur.

Phenotype

The set of observable characteristics of an individual resulting from the interaction of its genotype with the environment.

Genotype

The underlying combination of genetic material present (but not outwardly visible) in an organism.