If we set the real effective exchange rate index between Canada and the United States equal to 100 in 1998, and find that the U.S. dollar has risen to a value of 112.6, then from a competitive perspective the U.S. dollar is:

Question

Quizplus · Accepted Answer

Since the U.S. dollar has risen in value, it means that it takes fewer dollars to purchase Canadian goods and services. This suggests that the U.S. dollar is stronger than the Canadian dollar, and therefore, it is overvalued.

If We Set the Real Effective Exchange Rate Index Between