If the Absolute PPP Suggest That the Dollar to Pound

question 19

Multiple Choice

If the absolute PPP suggest that the dollar to pound should be 1.88 and the actual exchange rate in London is 2.50 $/pound,then:

• A) The British pound is overvalued.
• B) The U.S. dollar is overvalued
• C) The British pound is undervalued
• D) Exchange rates and absolute PPP are unrelated.

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