Suppose Purchasing Power Parity (PPP) Depends Only on Hamburgers

question 79

Multiple Choice

Suppose purchasing power parity (PPP) depends only on hamburgers. The exchange rate is C$1.00 = US$0.80 and hamburger prices are C$2.00 in Canada and US$1.80 in the U.S. PPP suggests that the

• A) demand for Canadian dollars will decrease.
• B) Canadian dollar is overvalued.
• C) Canadian dollar is undervalued.
• D) supply of Canadian dollars will increase.
• E) supply of U.S. dollars will increase.

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Definitions:

Interval

A range of values or numbers that includes an upper and lower boundary.

Binomial

A probability distribution that describes the number of successes in a fixed number of independent trials, with only two possible outcomes for each trial.

Normal Curve

A symmetrical, bell-shaped curve that represents the distribution of many types of data where most occurrences take place around the mean.

Standard Deviation

An indicator of the extent of variability or spread within a set of numbers, showing the degree to which these numbers deviate from the average value.