Multiple Choice
Suppose that the exchange rate is 10 Moroccan dirhams per Canadian dollar. Also suppose that you can buy a crate of oranges for 300 dirhams in the Moroccan capital of Rabat and can buy a similar crate of oranges in Ottawa for $35. Which of the following is consistent with these facts?
A) The real exchange rate is greater than one, and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
B) The real exchange rate is greater than one, and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.
C) The real exchange rate is less than one, and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
D) The real exchange rate is less than one, and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.
Correct Answer:
Verified
Correct Answer:
Verified
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