If the implied PPP exchange rate is $1.35/€ and the actual exchange rate is $1.45/€, the...

Question

Question

If the implied PPP exchange rate is $1.35/€ and the actual exchange rate is $1.45/€, the us dollar is overvalued.

A. Ture

B. False

Answer 1

Answer #1

The answer is FALSE
PPP exchange rate is the fair exchange rate

which is 1 Euro = $1.35

But actual rate is 1 Euro = $1.45

Hence, the dollar is undervalued

Dollar is buying less euros than it should

Answer is B.False

Answer 2

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