If the Nominal Exchange Rate Between the Dollar and the Thai

question 6

Multiple Choice

If the nominal exchange rate between the dollar and the Thai baht (baht per dollar) is lower than the relative purchasing power between the two countries,which of the following would be true?

• A) Purchasing power parity predicts that the value of the dollar will fall as traders take advantage of profit opportunities.
• B) Purchasing power parity predicts that the baht is undervalued as traders take advantage of profit opportunities.
• C) There are opportunities for profit by purchasing goods in Canada and selling them in Thailand.
• D) There are no opportunities for profit by purchasing goods in one country and selling them in the other.

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Definitions:

Elastic Tissue

A type of connective tissue that allows tissues in the body to resume their shape after stretching or contracting.

Vertebrae

The individual bones that stack to form the vertebral column or spine.

Dense Irregular Connective Tissue

A type of connective tissue with fibers that are thick, densely packed, and arranged in an irregular pattern, providing strength and resistance to forces from multiple directions.

Reticular

Pertaining to a network or mesh, often used to describe certain connective tissues or structures within organs that have a net-like composition.