Which of the following statements is true? O a) When the Canadian dollar appreci

Question

Which of the following statements is true? O a) When the Canadian dollar appreciates against the U.S. dollar, living standards in Canada improve at the same rate as the currency appreciation b) When the Canadian dollar appreciates against the U.S. dollar, living standards in Canada deteriorated at the same rate as the currency appreciation. c) There is little difference when comparing standards of living between countries when current exchange rates are used in place of PPP exchange rates d) Both le

Explanation / Answer

Canadian dollar appreciate against US dollar means Canada has to spend less to import from the US. Import in Canada will be increased. Net export will be decreased. Thus inflation in Canada will be decreased. As a result standard of living will be high in Canada. option a is correct

In case of PPP exchange rate, purchasing power is same. But when uses current exchange rate there is a little difference between purchasing power that is the difference between standards of living. Option c is correct.

Option d is correct

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