Suppose the Exchange Rate Between the U

question 52

Multiple Choice

Suppose the exchange rate between the U.S. dollar and the Jamaican dollar was $1 U.S. = $40 Jamaican dollars. A beach towel sells for $20 in Miami and $60 Jamaican in Negril.

• A) Purchasing power parity does not prevail with these prices.
• B) The U.S. dollar would be expected to depreciate.
• C) The Jamaican dollar would be expected to appreciate.
• D) All of the above are correct.