Multiple Choice
If a PPP estimate of the dollar/pound exchange rate is $1.61/£ and the current spot rate is observed to be $1.68/£, on the basis of these two rates you should, viewing the long run,
A) expect the pound to appreciate against the dollar.
B) expect the dollar to appreciate against the pound.
C) take a "short" position in dollars.
D) have no expectation regarding the likely movement of the dollar/pound exchange rate.
Correct Answer:
Verified
Correct Answer:
Verified
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