Table 1-5 on the book's website gives data on the exchange rate between the U.K. pound and
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Table 1-5 on the book's website gives data on the exchange rate between the U.K. pound and the U.S. dollar (number of U.K. pounds per U.S. dollar), as well as the consumer price indexes in the two countries for the period 1985–2007.
a. Plot the exchange rate (ER) and the two consumer price indexes against time, measured in years.
b. Divide the U.S. CPI by the U.K. CPI and call it the relative price ratio (RPR).
c. Plot ER against RPR.
d. Visually sketch a regression line through the scatter points.
e. Update the data in Table 1-5 to year 2020. Repeat questions a, b, c, and d and find out if there is any changes in the results. What accounts for the change, if any, in the results?
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