The Table Below Shows Indexes for the Price Levels for Canada

question 32

Multiple Choice

The table below shows indexes for the price levels for Canada and the United States and the nominal exchange rate between their currencies (the Canadian-dollar price of 1 U.S.dollar) .
TABLE 34-2
-Refer to Table 34-2.According to the theory of purchasing power parity (PPP) ,the Canadian-U.S.exchange rate in 2008 should have been________,meaning that the actual Canadian dollar in that year was ________ relative to its PPP value.

• A)0.94; overvalued
• B)0.94; undervalued
• C)1.06; undervalued
• D)1.06; overvalued

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Definitions:

Inventory Turnover

A proportion demonstrating the rate at which a company's goods are sold and then replenished over an interval.

Cost of Goods Sold

Direct costs tied to the process of producing goods a company puts up for sale, inclusive of labor and materials.

Average Inventory

A means of measuring the approximate amount of inventory a company holds over a certain period, aiming to balance holding costs against stockout risks.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting overheads, interest, tax, and other expenses.