2.a) (15 points) Indicate if the following statement is true or false: "When relative purchasing power parity (PPP) holds, absolute PPP does not necessarily hold as well.'' Use equations to support your answer.

2.b) (15 points) Assume that the nominal exchange rate between the Canadian and U.S. dollar is equal to $0.75 US dollars per Canadian dollar. Also assume that in Canada a BigMac sells for $6.77 Canadian dollars, whereas in the United States it sells for $5.58 US dollars. Indicate if the following statement is true or false: "In this case, the law of one price does not hold because the (BigMac) real exchange rate is higher than one." Show all your calculations.