Suppose that the price of an identical sport-utility vehicle is $32,000 in U.S. dollars in the United States and $32,000 in Canadian dollars in Canada. Suppose in addition that the exchange rate between Canada and the United States is one Canadian dollar equals $0.75 U.S. dollar. Does purchasing power parity hold for SUVs between the United States and Canada?
A) No, because SUVs are more expensive in Canada than the United States.
B) No, because SUVs are more expensive in the United States than in Canada.
C) Yes, because SUVs have the same price in each local currency.
D) Without knowing interest rates, we canʹt say.

Question

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The Answer of Suppose that the price of an identical sport-utility vehicle is $32,000 in U.S. dollars in the United States and $32,000 in Canadian dollars in Canada. Suppose in addition that the exchange rate between Canada and the United States is one Canadian dollar equals $0.75 U.S. dollar. Does purchasing power parity hold for SUVs between the United States and Canada?
A) No, because SUVs are more expensive in Canada than the United States.
B) No, because SUVs are more expensive in the United States than in Canada.
C) Yes, because SUVs have the same price in each local currency.
D) Without knowing interest rates, we canʹt say.

Suppose That the Price of an Identical Sport-Utility Vehicle Is