Author Question: If a nation's interest rates are relatively low compared to those of other countries, then the ... (Read 7 times)

ss2343 · **on:** Apr 19, 2019

Question 1

A Big Mac costs $3 in the United States and 50 pesos in Mexico. The purchasing power parity theory would predict that the exchange rate in the long run is

◦ $1 = 6 pesos.
◦ $1 = 16.67 pesos.
◦ $1 = 0.06 pesos.
◦ 1 peso = $1.50.

Question 2

If a nation's interest rates are relatively low compared to those of other countries, then the exchange value of its currency will tend to

◦ depreciate under a system of floating exchange rates.
◦ depreciate under a system of fixed exchange rates.
◦ appreciate under a system of fixed exchange rates.
◦ appreciate under a system of floating exchange rates.

cuttiesgirl16 · **Reply #1 on:** Apr 19, 2019

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