If the exchange rate between the Canadian dollar and the Indian rupee (rupees per dollar) is greater than the relative purchasing power between the two countries, which of the following would be true?
A) There are opportunities for profit by purchasing goods in India and then selling them in Canada.
B) Purchasing power parity predicts that the value of the dollar will rise as traders take advantage of arbitrage opportunities.
C) Purchasing power parity predicts that the dollar is undervalued as traders take advantage of arbitrage opportunities.
D) There are no arbitrage opportunities for which traders can take advantage.
Ans: A) There are opportunities for profit by purchasing goods in India and then selling them in Canada.
You might also like to view...
A public good
A) is a good that is usually consumed in public, such as a restaurant meal. B) is a good people can consume even if they do not pay for it. C) is a good produced by government. D) results in an efficient allocation of resources. E) is a good for which people are willing to pay a very high price.
Suppose in the beginning of 2013, a country has a national debt of $8,000 billion. Its GDP in 2013 is $32,000 billion and its budget deficit of $1,600 billion. Compute its debt-GDP ratio at the end of the year.
A) about 5. 0% B) about 20,0% C) about 25.0% D) about 30%