The US Inflation Rate Is Expected to Be 4 Percent

Multiple Choice

The US inflation rate is expected to be 4 percent over the next year, while the European inflation rate is expected to be 3 percent. The current spot rate of the dollar is 0.80 euro. Using purchasing power parity, the expected spot rate at the end of one year is ____ euro to the nearest cent.

A) 0.81
B) 0.79
C) 0.80
D) None of the above