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Suppose that purchasing power parity condition holds. If inflation in Mexico (foreign country) is 6% and inflation in Canada (home country) is 2%, what is

Suppose that purchasing power parity condition holds. If inflation in Mexico (foreign country) is 6% and inflation in Canada (home country) is 2%, what is expected to happen to the value of the peso (i.e., nominal exchange rate)?

a. depreciate by 6%

b. appreciate by 6%

c. appreciate by 4%

d. depreciate by 4%

e. depreciate by 2%

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