If purchasing-power parity holds, which of the following is the implication for the Canadian dollar?
A)The Canadian dollar will buy more goods in foreign countries than in Canada.
B)The Canadian dollar will buy as many goods in foreign countries as it does in Canada.
C)The Canadian dollar will buy fewer goods in foreign countries than it does in Canada.
D)The amount of goods that the Canadian dollar buys is not determined by purchasing power parity.

Question

Quizplus · Accepted Answer

Purchasing-power parity states that the exchange rate between two countries should equalize the prices of an identical basket of goods and services in each country. Therefore, if purchasing power parity holds, the Canadian dollar will buy the same amount of goods in foreign countries as it does in Canada.

If Purchasing-Power Parity Holds, Which of the Following Is the Implication