If the 2005 Inflation Rate in Canada Is 4 Percent,and

question 118

Multiple Choice

If the 2005 inflation rate in Canada is 4 percent,and the inflation rate in Mexico is 2 percent,then the theory of purchasing power parity predicts that,during 2005,the value of the Canadian dollar in terms of Mexican pesos will

• A)rise by 6 percent.
• B)rise by 2 percent.
• C)fall by 6 percent.
• D)fall by 2 percent.

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