Consider relative purchasing power parity (PPP) and remember the consumer price index (CPI) provides the price level in a country at any point in time. Assume CPI in the US is 165 in 2010 and 200 in 2015, and CPI in Canada is 170 in 2010 and 220 in 2015 (with base year as 2000). If the spot exchange rate was 0.7640 USD/CAD in 2010.

What is it in 2015 if relative PPP holds?

Answer rating: 100% (QA)

Determine the exchange rate in 2015 based on relative purcha... View the full answer