Author Question: Assume the exchange rate is 1 U.S. dollar equals 1.10 Canadian dollars. If purchasing power parity ... (Read 47 times)

serike · **on:** Jun 29, 2018

Assume the exchange rate is 1 U.S. dollar equals 1.10 Canadian dollars. If purchasing power parity is correct, a DVD that has a price of 10 in Rochester, New York, in Canada has a price of ________ Canadian dollars.

A) 10.00 B) 10.10 C) 11.00 D) 11.11 E) 9.09

Question 2

If the Fed wants to lower the nominal interest rate in the long run, the Fed ________ the growth rate of the quantity of money.

A) raises
B) first lowers and then raises
C) lowers
D) does not change
E) None of the above answers is correct because the premise of the question is wrong since the Fed cannot affect the nominal interest rate, only the real interest rate.