Suppose That the Current Spot Exchange Rate of Canadian Dollars

question 43

Multiple Choice

Suppose that the current spot exchange rate of Canadian dollars for Russian rubles is $0.15/1ruble. The price of Russian-produced goods increases by 8 percent, and the Canadian price index increases by 3 percent. According to PPP, the 8 percent rise in the price of Russian goods relative to the 3 percent rise in the price of Canadian goods results in a(n)

• A)depreciation of the Russian ruble by 5 percent.
• B)depreciation of the Russian ruble by 6 percent.
• C)appreciation of the Russian ruble by 5 percent.
• D)appreciation of the Russian ruble by 6 percent.
• E)depreciation of the Russian ruble by 7 percent.

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Definitions:

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services within an economy.

Independent Agency

A governmental body that operates independently from the executive branch and is not subject to its direct control.

State

A politically organized body of people usually occupying a definite territory; especially one that is sovereign.

Local Government Employees

Workers employed by municipal, county, or district authorities to provide services at the local level, including education, public safety, and infrastructure maintenance.