Question
Assume that relative PPP holds, and that USDCAD goes from 1.2 at t = 0 to 1.21 at t = 0. Also assume that the
Assume that relative PPP holds, and that USDCAD goes from 1.2 at t = 0 to 1.21 at t = 0. Also assume that the price level in Canada has remained constant (no inflation). Which of the following statements is necessarily correct?
- Absolute PPP holds
- Absolute PPP does not hold
- The price level in the US has increased (positive inflation)
- The real exchange rate has increased
- The real exchange rate has decreased
- None of the above
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Fundamentals of Investments Valuation and Management
Authors: Bradford Jordan, Thomas Miller
7th edition
978-0078096785, 78096782, 978-0077861636, 77861639, 978-0078115660
