Posted by admin | Posted in Peru | Posted on 12-08-2010
Tags: flickr, peru sol exchange rate, photo, photography, photos, sharing
Ma-Q Power Purchase Parity?
The nominal exchange rate between the Canadian dollar and the Peruvian nuevo sol is: e = P * / P, where e is nominal exchange rate between the Canadian dollar and a new Peruvian sol, P is the price of a basket of goods in Canada, and P * is the price of a basket of goods in Peru. Suppose purchasing power parity. If the inflation rate in Peru is raised well above that in Canada, what happens to the nominal exchange rate between the Canadian dollar and the new Peruvian sol? A. The dollar depreciates and the nuevo sol appreciated. B. The dollar is appreciated and the nuevo sol depreciated. C. The nominal exchange rate between two currencies is maintained constant. I think the answer is B, but I'm not sure. Any help would be greatly appreciated.
B. The dollar appreciates and depreciates the new sun.
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