Explain what will happen to the exchange rate today e


Consider that today is time T-1. Today, all real incomes, money supplies, and the interest rates in two countries do not change at all. Explain what will happen to the exchange rate today, E$/£, (rise/fall) if everyone realizes that the U.K. real income will fall permanently by 10% one year later, at time T. The answer should have the reasons for the change of the exchange rate.

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Financial Management: Explain what will happen to the exchange rate today e
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