1. Purchasing power parity STEP-2of2 Suppose that exchange rate between the dollar and the peso is in equilibrium when inflation in the U.S. rises to 8.50%. At the same time, inflation in Mexico is 1.00% If the inflation rate in the U.S. is denoted as Ih and the inflation rate in Mexico is It, then which of the folowing expressions represents the percent change in the peso under PPp? 1+11+l411+141+l4+11+l41+l411+l41+l1+1 According to this formula, percentage change in the peso should be under PPP. The following graph plots the percentage change in the spot rate for a foreign currency along the horizontal axis, while measuring the inflation rate differential (between a home country and a foreign country) along the vertical axis, lis refers to the infiation rate in the home country, while if refers to the Aflation rate in a foreign country, On the following graph, use the blue line (circle symbol) to plot the combinations of percentage change between the forelgn currency spot rate and inflotion rate differential that are consistent with purchasing power panty (PPP)