According to Purchasing-Power Parity,if Prices in Canada Increase by a Smaller

question 153

Multiple Choice

According to purchasing-power parity,if prices in Canada increase by a smaller percentage than prices in Algeria,how does the exchange rate change?

• A) The real exchange rate,defined as Algerian goods per unit of Canadian goods,rises.
• B) The real exchange rate,defined as Algerian goods per unit of Canadian goods,falls.
• C) The nominal exchange rate,defined as Algerian currency per dollar,rises.
• D) The nominal exchange rate,defined as Algerian currency per dollar,falls.

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Definitions:

Borrowing Rate

The interest rate that a lender charges a borrower for the loan of funds, varying based on credit risk, loan amount, and duration.

Net 60

A payment term indicating that payment is due 60 days after the invoice date.

Lock Box System

A banking service provided to companies for speeding up collection of payments by having those payments sent directly to a bank's PO box, rather than to the company.

Clearing Time

The period between the initiation of a transaction and its settlement, during which the transaction is processed and validated.