Question: Assume the current exchange rate between the US dollar and the UK Pound Sterling is 0.6 ($ per pound). Assuming the purchase price parity theory

Assume the current exchange rate between the US dollar and the UK Pound Sterling is 0.6 ($ per pound). Assuming the purchase price parity theory holds, what is the new exchange rate ($ per pound).

If the price level in the US increases by 5% and the price level in the UK increases by 20%?

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