Assume the exchange rate is about 292 Kazakhstan tenge per dollar. According to purchasing-power parity, when would this exchange rate rise?

Question

Quizplus · Accepted Answer

According to purchasing-power parity, if the price level in Canada fell or the price level in Kazakhstan rose, the exchange rate would rise. This is because if prices in Canada fall, Canadian goods become relatively cheaper, which would lead to an increase in demand for Canadian goods and, consequently, an increase in demand for Canadian dollars. Similarly, if prices in Kazakhstan rise, goods from Kazakhstan become relatively more expensive, leading to a decrease in demand for Kazakhstan's currency and an increase in demand for dollars. Both of these factors would put upward pressure on the exchange rate.

Assume the Exchange Rate Is About 292 Kazakhstan Tenge Per