Multiple Choice
The table below shows indexes for the price levels for Canada and the United States and the nominal exchange rate between their currencies (the Canadian-dollar price of 1 U.S.dollar) .
TABLE 34-2
-Refer to Table 34-2.According to the theory of purchasing power parity (PPP) ,the Canadian-U.S.exchange rate in 2008 should have been________,meaning that the actual Canadian dollar in that year was ________ relative to its PPP value.
A) 0.94; overvalued
B) 0.94; undervalued
C) 1.06; undervalued
D) 1.06; overvalued
Correct Answer:
Verified
Correct Answer:
Verified
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