Purchasing Power Parity
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Suppose that the inflation rate on the United States is 4 percent and in Canada it is 5 percent. What would you expect is happening to the exchange rate between the United States and Canadian dollars?
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This solution is comprised of a detailed explanation to answer what would you expect is happening to the exchange rate between the United States and Canadian dollars.
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Assuming the initial exchange rate is X, or 1 USD = X CAD
one year later, the 1 ...
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