Use the information provided below to answer the following question(s).
The exchange rate between the British pound and the U.S. dollar is 2. In England, the price level is 1.0 and the one-year interest rate is 20%. In the United States, the price level is .8 and the one-year interest rate is 8%. The inflation rate in both countries is zero.
-Refer to the information above.The price of U.S.goods measured in pounds is
A).8.
B)1.0.
C)1.6.
D)2.
E) none of the above

Question

Quizplus · Accepted Answer

To find the price of U.S. goods measured in pounds, we need to use the formula:

Price of U.S. goods in pounds = Price of U.S. goods in dollars x Exchange rate

From the information given, we know that the price level in the United States is 0.8 and the exchange rate is 2. Therefore:

Price of U.S. goods in pounds = 0.8 x 2 = 1.6

So the answer is choice C, 1.6.

Use the Information Provided Below to Answer the Following Question(s)