Question: A consumption bundle costs CAD 15,000 in Canada. The same consumption bundle costs 12,000 euros in Germany. If the market exchange rate is CAD 1.25

A consumption bundle costs CAD 15,000 in Canada. The same consumption bundle costs 12,000 euros in Germany. If the market exchange rate is CAD 1.25 per euro we can conclude that:

The euro is over valued relative to the dollar.

The euro is undervalued relative to the dollar.

The euro is neither overvalued or undervalued relative to the dollar.

The data is not sufficient to support any of the above three statements.

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