Suppose the Big Macs are more expensive in Canada than in China,when measured by U.S.dollar.According to the purchasing power parity theorem,
A)the Canadian dollar will appreciate against the Chinese yuan.
B)the Chinese yuan will appreciate against the Canadian dollar.
C)the Chinese yuan will depreciate against the Canadian dollar.
D)both Canadian dollar and the Chinese yuan will depreciate against the U.S.dollar.

Question

Quizplus · Accepted Answer

According to the purchasing power parity theorem, when the same product is more expensive in one country than in another, the currency of the country with the more expensive product is likely to appreciate relative to the currency of the country with the cheaper product. Therefore, in this case, the Chinese yuan will appreciate against the Canadian dollar.

Suppose the Big Macs Are More Expensive in Canada Than