Suppose the dollar-pound rate equals $0.5 per pound. According the purchasing power parity theory, what will happen to the dollar’s exchange rate under each of the following scenarios?
a. The U.S. price level increases by 10% and price level in Britain stays constant
b. The U.S. price level increases by 10%, while price level in Britain increases 20%
c. The U.S. price level decreases by 10%, while price level in Britain increases by 5%