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:

Marginal Mean

The mean of a subset of grouped data, considering one or more factors in a multi-factorial design.

Main Effect

The immediate impact that an independent variable has on a dependent variable within an experimental setting.

Interaction Effect

An occurrence in statistical analysis where the effect of one independent variable on a dependent variable changes depending on the level of another independent variable.

Crime Area

A geographic region or locale known for its high incidence of criminal activity.