Business, 18.12.2019 05:31 amypeace1978

Suppose the price level of a bundle of goods in the us is pus = $75, 000 and the price level in the uk is puk = £50, 000 for the same bundle. then the ppp rate on the £ is eppp = $/£. suppose that the market exchange rate is 1.6 $/£. then would you say the £ is overvalued or undervalued compared to ppp? considering relative ppp, suppose that in 2009 the exchange rate was 1.6 $/£. in the 10-year period since then suppose the uk inflation rate was 20% overall and the us inflation rate was 15%. would you expect the £ to depreciate or appreciate compared to the $ over that period? assuming that relative ppp actually held, then what would the exchange rate be in 2015? \

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Suppose the price level of a bundle of goods in the us is pus = $75, 000 and the price level in the...

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