Suppose That the Price of an Identical Sport-Utility Vehicle Is

Multiple Choice

Suppose that the price of an identical sport-utility vehicle is $32,000 in U.S. dollars in the United States and $32,000 in Canadian dollars in Canada. Suppose in addition that the exchange rate between Canada and the United States is one Canadian dollar equals $0.75 U.S. dollar. Does purchasing power parity hold for SUVs between the United States and Canada?

A) Yes, because SUVs have the same price in each local currency.
B) No, because SUVs are more expensive in Canada than in the United States.
C) No, because SUVs are more expensive in the United States than in Canada.
D) Without knowing interest rates, we can't say.