Assume that the Canadian dollars spot rate is 0.85 and that the Canadian and united states inflation rates are similar. then assume that Canada experiences 4% inflation while the United States experience a 3% inflation. According to PPP, what will be the new value of the Canadian dollar after it adjusts to the inflationary changes and comment on what would have happened to the Canadian dollar.

Answer rating: 100% (QA)

According to the theory of Purchasing Power Parity PPP exchange rates should adjust to reflect chang... View the full answer