Imagine that Canada is having a problem with the level of prices rising. Its inflation rate is high but its neighbor to the south, the United States, has an even worse level of inflation and now has high inflation rate compared to Canada. Canada is the U.S.s largest trading partner. Purchasing Power Parity Theory would indicate that the relative inflation between the two countries would move the Canadian dollars value over time and would have an effect on trade flows with the U.S.) Explain what would happen for each of the following scenarios given the information presented above.

1. Canadas currency value relative to the U.S. dollar would rise, fall, or stay same:

2. Volume of Imported goods into Canada from the U.S. would rise, fall, or stay the same:

3.Volume of Exported goodss from Canada to the U.S. would rise, fall, or stay the same:

4. Would the impact with the U.S. be the same with all other countries? Yes or no.