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| Teaching Since: | May 2017 |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
4.9Â Â Â Â Â Â Â Suppose that for the same basket of goods the time zero price indices in countries D and F are P0DÂ = D100 and P0FÂ = F1, so that S0D/F = P0D/P0FÂ = D100/F. Inflation rates in countries D and F are expected to be 10 percent and 21 percent per period, respectively, over the foreseeable future.
a.   What are the expected price levels E[P1D] and E[P1F] and the expected nominal spot rate of exchange E[S1D/F] in one period?
b.   Looking two years into the future, what are the expected future price levels E[P2D] and E[P2F] in these two countries?
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