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The exchange rate is 0.75 US dollars (USD) per 1.00 Canadian dollar (CAD) when the price of a Big Mac in New York is 3.00 USD and the price of a Big Mac in Toronto is 4.00 CAD.

The exchange rate is 0.75 US dollars (USD) per 1.00 Canadian dollar (CAD) when the price of a Big Mac in New York is 3.00 USD and the price of a Big Mac in Toronto is 4.00 CAD. If the price of a Big Mac in Toronto increases to 5.00 CAD but the price of the Big Mac in New York remains at 3.00 USD, the Canadian dollar will be expected to appreciate against the US dollar in the near future. 

(a)True 

(b) False

macroeconomics   
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Answer #1

 FALSE.

CAD depreciates to $3/CAD5 (USA price of Big Mac / Canada price of Big Mac) = $0.60/CAD.


answered by: ANURANJAN SARSAM
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