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Homework answers / question archive / At the beginning of the year, the exchange rate between European euro and the U
At the beginning of the year, the exchange rate between European euro and the U.S. dollar was 1.1 dollar per
euro. Over the year, European inflation was 8 percent and U.S. inflation was 2 percent. Explain what should we
expect to happen to the U.S. dollar relative to European? Provide the intuition.