Let the nominal exchange rate between the United States and Canada be CAN$0.88 for US$1. A tourist will be able to buy a souvenir on the Canadian side of Niagara Falls that costs CAN$10 when she has US$13 in her wallet.

Question

Quizplus · Accepted Answer

The tourist has US$13, which can be exchanged for CAN$11.44 (US$13 x CAN$0.88). This is more than enough to buy the souvenir that costs CAN$10. Therefore, the statement is true.

Let the Nominal Exchange Rate Between the United States and Canada