Suppose the Expected Inflation in the U

question 42

Multiple Choice

Suppose the expected inflation in the U.S.on January 1,1988 was projected at 5% annually for the next 5 years and at 12% annually in Italy for the same time period,and the lira/$ spot rate that day was currently at L2400 = $1,then the PPP estimate of the spot rate five years from now was

• A)1738
• B)3314
• C)2560
• D)2250

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