Assume the Spot Rate of $1 Is £

question 30

Multiple Choice

Assume the spot rate of $1 is £.7347.Also assume the expected inflation rate in the U.K.is 2.1 percent while the U.S.inflation rate is 3.6 percent.What is the expected exchange rate three years from now if relative purchasing power parity exists?

• A)£.7237
• B)£.6306
• C)£.7683
• D)£.7021
• E)£.7667

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Definitions:

Decomposer

Organisms, primarily bacteria and fungi, that break down dead organic material, contributing to nutrient recycling in ecosystems.

Caterpillar

The larval stage of butterflies and moths, which is typically a voracious feeder on leaves before undergoing metamorphosis.

Secondary Consumer

An animal that eats herbivores (primary consumers).

Primary Consumer

Herbivores that feed on primary producers (plants and algae), playing a pivotal role in the transfer of energy through the food chain.