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Macroeconomics

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Purchasing Power Parity

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If the real exchange rate of Canada relative to the United States is neither over or undervalued, and the inflation rate in Canada is 4%, while the inflation rate in the United States is 2%, the Canadian nominal exchange rate is expected to

A

appreciate by 6%.

B

appreciate by 2%.

C

depreciate by 6%.

D

depreciate by 2%.