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

Multiple Choice

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

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