Suppose the Exchange Rate Between the U

question 5

Multiple Choice

Suppose the exchange rate between the U.S.dollar and the British pound is initially 2.00 dollars per pound.According to relative purchasing-power parity,if the price of traded goods rises by 10 percent in the United States and remains constant in the U.K,the exchange rate will become:

• A) 1.80 dollars per pound
• B) 1.98 dollars per pound
• C) 2.02 dollars per pound
• D) 2.20 dollars per pound