The Current Spot Rate Between Australia and the US Is

question 35

Multiple Choice

The current spot rate between Australia and the US is US$0.6789 per AUD$1.The expected inflation rate in the US is 2.1 per cent.The expected inflation rate in Australia is 2.6 per cent.If relative purchasing power parity exists,what will the exchange rate be next year?

• A)AUD$1 = US$1.5601
• B)AUD$1 = US$0.6755
• C)AUD$1 = US$1.4804
• D)AUD$1 = US$0.6410
• E)AUD$1 = US$0.7110

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