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Question
A year ago the spot rate of U.S. dollars for Canadian dollars was $1/C$1. Since that time, the rate of inflation in the U.S. has been 4% greater than that in Canada. Based on the theory of Relative PPP, the current spot exchange rate of U.S. dollars for Canadian dollars should be approximately _________ per Canadian dollars.
a. $0.96
b. $1
c. $1.04
d. $4
Answer
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