c) Suppose that money-supply growth is higher in China than it is in Canada. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate?

Suppose the US dollar is currently trading at a nominal exchange rate of e=120 Yen. If the inflation rate in the US is 5% over the next period when the inflation rate in Japan is 15% during the same period, what is the predicted value of the nominal exchange rate (in Yen) in the next period if purchasing power parity holds? Round to two decimals.

Suppose that a U.S. dollar buys more gold in Australia than it buys in Russia. What does purchasing-power parity imply should happen?

Suppose that the rate of returns on U.S dollar is 2% and the rate of return on Japanese yen (¥) is 2.5%.   Under interest parity, find the ratio of the current to the expected exchange rate (ℇe/ℇ)?

The Purchasing Power Parity (PPP) theory of the exchange rate implies that the currency of a country A would depreciate against that of country B if: (a) the inflation rate in A exceeds that in B (b) the normal interest rate in A exceeds that in B (c) the growth rate of GDP in B exceeds that in A (d) foreign direct investment moves from B to A

Suppose the U.S.-EU exchange rate is $1.15 per Euro, the U.S. has 5% inflation, and the EU has 10% inflation. Under these conditions the real U.S.-EU exchange rate, rounded to the nearest cent, is approximately: $1.20 per Euro $1.10 per Euro $1.30 per Euro $1.09 per Euro

The Big Mac index is used as a rough measure of purchasing power parity across countries. The Economist magazine recently included the Vietnamese dong in its calculation of the Big Mac index. A Big Mac costs $5.06 in the United States but only 60,368 dong or $2.66 in Vietnam (at the current exchange rate). What does this information suggest about the value of the real exchange rate of the U.S. dollar relative to the Vietnamese dong (treating the United States as the domestic economy, so the nominal exchange rate is expressed as dong per dollar)? Is the real exchange rate likely to be greater than or less than 1?

We noted that in 1900, the fixed exchange rate between the British pound and the U.S. dollar was 1 pound equals $5. What is the exchange rate today? Whose currency has gained the most in purchasing power? What caused this dramatic change in the exchange rate?

Suppose purchasing power parity is true. What happens to the nominal exchange rate if the price of domestically produced goods (in terms of domestic currency) rises? What happens to the real exchange rate?

Country A’s goods have become relatively less expensive for Country B’s buyers due to a change in the exchange rate between those two country’s currencies. All other things remaining constant, this could be because Country B’s currency has __________ relative to Country A’s currency. a) shifted b) appreciated c) stagnated d) depreciated