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The Next Questions Refer to the Following

Question 20

Multiple Choice

The next questions refer to the following.
Suppose prices in the US are twice as high as those in England, but the US interest rate is 4% while the interest rate in England is 8%. No inflation is expected in either country.
-In the long run,PPP theory predicts that the exchange rate should be


A) $1.04 = £2.16
B) $1 = £2
C) £1 = $2
D) £1.08 = $2.08
E) £1.04 = $2.08

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