Question: The inflation rate in the U.S. is 3%, while the inflation rate in Canada is 4%. The current exchange rate for the Canadian dollar is

The inflation rate in the U.S. is 3%, while the inflation rate in Canada is 4%. The current exchange rate for the Canadian dollar is $0.740. After supply and demand for the Canadian dollar has adjusted in the manner suggested by purchasing power parity (PPP), the new exchange rate for the Canadian dollar will be:

options:

	$0.743
	1%
	$0.726
	$0.770

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