Suppose the exchange rates betwe he United States and Canada are in long -run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S. and Canadian rates of inflation would O be completely offset by changes in the real exchange rate. O have no effect on nominal exchange rates. be completely offset by changes in the nominal exchange rate. O violate the conditions for the law of one price.

Suppose the exchange rates betwe he United States and Canada are in long -run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S. and Canadian rates of inflation would O be completely offset by changes in the real exchange rate. O have no effect on nominal exchange rates. be completely offset by changes in the nominal exchange rate. O violate the conditions for the law of one price.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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