The US Inflation Rate Is Expected to Be 4 Percent Over

Multiple Choice

The U.S. 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 euro is $1.03. Using purchasing power parity, the expected spot rate at the end of one year is $____.

A) 1.02
B) 1.03
C) 1.04
D) none of the above