Suppose the price of gold is initially $300 per ounce in New York and 450 Canadian dollars per ounce in Toronto, Canada. If the law of one price holds for gold, the nominal exchange rate is ________ Canadian dollars per U.S. dollar. If Canada experiences inflation, such that the price of gold rises to 510 Canadian dollars per ounce, but the U.S. does not experience any inflation, the nominal exchange rate would be ________ Canadian dollars per U.S. dollar.
A. 0.67; 0.59
B. 1.70; 1.50
C. 1.50; 1.70
D. 0.59; 0.67
Answer: C
You might also like to view...
Low wages and poor working conditions in many U.S. trade partners
A) prove that the gains-from-trade arguments of the Ricardian model are false. B) may be a fact of life, but economists don't care. C) are facts emphasized by U.S. labor in its contract negotiations. D) prove that the gains-from-trade arguments of the Ricardian model are true. E) prove that international trade is exploitative.
Import quotas on sugar result in lower sugar prices in the United States
a. True b. False
Government revenue from a tariff is equal to the amount of the tariff times the quantity imported
a. True b. False Indicate whether the statement is true or false
With sticky prices increasing, the supply of money results in:
a. an increase in the nominal rate of interest. b. an increase in the U.S. dollar exchange rate. c. a decrease in the nominal rate of interest. d. increased price and wage flexibility.