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

question 55

Multiple Choice

In the spot market,$1 is currently equal to £0.6211.Assume the expected inflation rate in the U.K.is 2.6 percent while it is 4.3 percent in the U.S.What is the expected exchange rate four years from now if relative purchasing power parity exists?

• A)£0.5799
• B)£0.5822
• C)£0.6105
• D)£0.6623
• E)£0.6644

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Definitions:

Observational Learning

Learning that occurs through observing the behaviors of others and imitating those behaviors without direct instruction or reinforcement.

Operant Conditioning

A process of teaching in which behavior modification occurs as a result of either encouraging rewards or imposing punishments.

Ivan Pavlov

A Russian physiologist known for his work in classical conditioning, demonstrating how stimuli can trigger conditioned responses.

Extinction

In psychology, it refers to the gradual weakening and eventual disappearance of a conditioned response.