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Purchasing power parity theory would suggest that if the Canadian price of a basket of goods is C$1,800, but the same basket in the United States is U.S.$1,300, and the actual exchange rate is C$1.30 = U.S.S1.00, then the value of the Canadian dollar should O A. depreciate by approximately 8.9 percent. O B. depreciate by approximately 6.2 percent. O C. appreciate by approximately 8.9 percent. O D. appreciate by approximately 6.2 percent. O E. remain unchanged.

Purchasing power parity theory would suggest that if the Canadian price of a basket of goods is C$1,800, but the same basket in the United States is U.S.$1,300, and the actual exchange rate is C$1.30 = U.S.S1.00, then the value of the Canadian dollar should O A. depreciate by approximately 8.9 percent. O B. depreciate by approximately 6.2 percent. O C. appreciate by approximately 8.9 percent. O D. appreciate by approximately 6.2 percent. O E. remain unchanged.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Purchasing power parity theory would suggest that if the Canadian price of a basket of goods is C$1,800, but the same basket in the United States is U.S.$1,300, and the actual exchange rate is C$1.30 = U.S.S1.00, then the value of the Canadian dollar should O A. depreciate by approximately 8.9 percent. O B. depreciate by approximately 6.2 percent. OC. appreciate by approximately 8.9 percent. O D. appreciate by approximately 6.2 percent. O E. remain unchanged.
Transcribed Image Text:Purchasing power parity theory would suggest that if the Canadian price of a basket of goods is C$1,800, but the same basket in the United States is U.S.$1,300, and the actual exchange rate is C$1.30 = U.S.S1.00, then the value of the Canadian dollar should O A. depreciate by approximately 8.9 percent. O B. depreciate by approximately 6.2 percent. OC. appreciate by approximately 8.9 percent. O D. appreciate by approximately 6.2 percent. O E. remain unchanged.
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