One Year Ago the Spot Rate of U

question 29

Multiple Choice

One year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time the rate of inflation in the U.S. has been 4% greater than that in Canada. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be approximately:

• A) $0.96/C$.
• B) $1/C$.
• C) $1.04/C$.
• D) Relative PPP provides no guide for this type of question.

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Definitions:

Societal Expectations

Refers to the anticipated behaviors and roles that society presumes individuals will follow based on cultural norms and traditions.

Conscious Mind

The aspect of the mind that is aware of the self, one's surroundings, and one's thoughts, feelings, and experiences at any given moment.

Reality Principle

The goals of the conscious mind, which finds what works in reality.

Structural Model

Sigmund Freud’s model of the mind with three parts: the id (or “it”), the ego (or “I”), and the super-ego (or “above I”).