Suppose the GDP Deflator in Canada Is 125 and the GDP

question 138

Multiple Choice

Suppose the GDP deflator in Canada is 125 and the GDP deflator in Japan is 100.Also assume Canada has trade barriers on Japanese goods in the form of quotas.What does this imply about the exchange rate of yen per dollar under the theory of purchasing power parity in the long run?

• A)The exchange rate of yen per dollar will be greater than 1.25.
• B)The exchange rate of yen per dollar will be equal to 1.25.
• C)The exchange rate of yen per dollar will be greater than 0.8 but less than 1.25.
• D)The exchange rate of yen per dollar will be equal to 0.8.
• E)The exchange rate of yen per dollar will be less than 0.8.

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Definitions:

Standard Normal Distribution

A specific probability distribution that has a mean of zero and a standard deviation of one, representing a normal distribution.

Unit of Measurement

A definite magnitude of a quantity, defined and adopted by convention or by law, that is used as a standard for measurement of the same kind of quantity.

Total Number

The aggregate count of all items or elements in a dataset or collection.

Standard Normal Distribution

A normal distribution with a mean of 0 and a standard deviation of 1, used in Z-tests and other statistical analyses.