Calculate the relation among the currency equilibrium


Assume the dollar interest rate and the pound sterling interest rate are the same 5 % per year. Calculate the relation among the currency equilibrium $/£ exchange rate and its expected future level? Assume the expected future $/£ exchange rate, $1.52 per pound, remains stable as Britain's interest rate rises to 10 percent per year. If the U.S interest also remains constant, determine the new equilibrium $/£ exchange rate?

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Macroeconomics: Calculate the relation among the currency equilibrium
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