The Next Questions Refer to the Following

question 4

Multiple Choice

The next questions refer to the following.
During a common base period, a basket of goods costs C$14,700 in Canada and US$10,000 in the US.
-Then purchasing power parity theory predicts that

• A) the real exchange rate will be 1.47
• B) the US will experience 4.7% more inflation annually than Canada for 10 years
• C) C$1 should exchange nominally for US$0.68
• D) the Canadian dollar will depreciate by 47% against the US dollar
• E) the US dollar will depreciate by 47% against the Canadian dollar

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Definitions:

Career

The pursuit of a lifelong ambition or the general course of progression towards lifelong goals.

Equally Likely

A term used in probability to describe events that have the same chance of occurring.

Probability

A numerical value representing the chance of an event's occurrence, between 0 and 1, where 0 stands for impossible and 1 for certain.

Ace of Spades

A specific playing card in a deck, often considered the highest card in the suit of spades and sometimes associated with special significance.