I. True/ False/ Uncertain - Briey explain. No credit without an explanation (8 marks each). 1. If the current USD/CAD exchange rate is 0.7809 US dollars per Canadian dollar and EPPP = 0.83, the Canadian dollar is undervalued. A higher real interest rate 7"* would lead to domestic real currency depreciation. A higher domestic nominal interest rate would lead to domestic currency nominal depreciation. Ination is equal to money supply growth in a growing economy. 9\"pr Flexible nominal exchange rate can compensate lack of downward wage exibility as an adjustment mechanism to Sudden Stops