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The following data is available. U.S. price level today = $9,830 UK price...

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Finance

The following data is available.

U.S. price level today = $9,830

UK price level today = 8,120 todays spot $/ = 1.34

(a)Does absolute PPP hold at this moment? If not, which currency is undervalued and which currency is overvalued? .

(b)Explain the actions in the economy which would lead the $/ to move to the equilibrium PPP exchange rate.

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