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    18-8. Inflation and Exchange Rates

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    18-8. Inflation and Exchange Rates. Suppose the current exchange rate for the Russian
    ruble is ruble 29.15. The expected exchange rate in three years is ruble 31.02. What
    is the difference in the annual inflation rates for the United States and Russia over
    this period? Assume that the anticipated rate is constant for both countries. What
    relationship are you relying on in answering?

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    The relationship is interest rate parity
    The difference in interest rates between the two ...

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