Currently,you Can Exchange €100 for $133

question 88

Multiple Choice

Currently,you can exchange €100 for $133.The inflation rate in Euroland is expected to be 2.5 percent.In one year,it is expected that €100 can be exchanged for $136.Assume relative purchasing power parity exists.What is the expected inflation rate in the U.S.?

• A)3.84 percent
• B)4.26 percent
• C)4.71 percent
• D)5.21 percent
• E)5.68 percent

---

Definitions:

Nominal Interest Rates

Refer to the interest rates before adjustments for inflation, representing the face value of interest paid or received.

Money Growth

Money growth refers to the rate at which the supply of money in an economy increases, influencing inflation and economic activity.

Venezuela

A country located in the northern coast of South America, known for its significant oil reserves but also for its political, social, and economic challenges.

Quantity Theory of Money

An economic theory that relates the quantity of money in an economy to the level of prices of goods and services.