Question

You hear an interview with a well-known economist who states that she expects the U.S. dollar to strengthen against the British pound over the next five to ten years. This economist is known for her support of the theory of purchasing power parity. Using an equation to summarize the relationship predicted by purchasing power parity between exchange-rate movements and the inflation rates in the two countries, explain whether you expect inflation in the United States to be higher or lower on average compared with that in the U.K. over the period in question.



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  • CreatedOctober 02, 2014
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