Asked by Ahmed El Masry on Sep 24, 2024
A widget costs $50 in the US and CAD$53 in Canada.The current exchange rate is 1USD=1.09CAD.Given purchasing power parity,the Canadian dollar would_______to equilibrate prices
A) Appreciate
B) Depreciate
C) Not change
D) None of the above
Purchasing Power Parity
An economic theory that compares different countries' currencies through a "basket of goods" approach, aiming to equalize purchasing power by taking into account inflation rates and cost of living.
Exchange Rate
The worth of one currency relative to another for conversion purposes, establishing the amount of one currency that can be swapped for another.
Canadian Dollar
The currency of Canada, represented by the symbol CAD or C$ and divided into 100 cents.
- Gain insight into the factors that affect demand for currency and how exchange rates are established.
- Understand the function of purchasing power parity (PPP) in establishing foreign exchange rates.
Learning Objectives
- Gain insight into the factors that affect demand for currency and how exchange rates are established.
- Understand the function of purchasing power parity (PPP) in establishing foreign exchange rates.