Gold is $350 per ounce in the United States and 2,800 pesos per ounce in Mexico. The nominal exchange rate between U.S. dollars and Mexican pesos that is implied by the PPP theory is that: $1 = _ peso

The nominal exchange rate between U.S. dollars and Mexican pesos that is implied by the PPP theory is that: $1 = 8 pesos. This is because the PPP theory suggests that the exchange rate should reflect the relative prices of goods and services between two countries. In this case, if gold is $350 per ounce in the United States and 2,800 pesos per ounce in Mexico, then the exchange rate should be such that $1 can buy 8 pesos. After Mexico experiences inflation and the price of gold rises to 4,200 pesos per ounce, while the price of gold remains $350 per ounce in the United States, the nominal exchange rate between U.S. dollars and Mexican pesos that is implied by the PPP theory is that: $1 = 12 pesos. This is because the PPP theory suggests that the exchange rate should adjust to reflect changes in relative prices due to inflation. Based on these findings, the correct statement is that countries with higher inflation rates tend to experience the most rapid depreciation, as seen in the increase in the implied exchange rate between U.S. dollars and Mexican pesos. According to the PPP theory, one barrel of crude oil should cost 420 pesos in Mexico. This is because if crude oil is $30 per barrel in the United States and the exchange rate is $1 = 12 pesos (as determined by PPP theory after inflation), then the price of crude oil in Mexico should be 30 x 12 = 360 pesos per barrel. However, crude oil prices may also be affected by other factors such as supply and demand. If gold is $350 per ounce in the United States and the exchange rate is 0.70 U.S. dollars per Canadian dollar, one ounce of gold should cost in Canadian dollars 500 Canadian dollars. This is because $350 x 0.70 = $245 Canadian dollars, and the exchange rate implies that $1 U.S. dollar is equivalent to $1.43 Canadian dollars ($1 divided by 0.70). Therefore, one ounce of gold in Canadian dollars would be $245 x 1.43 = $350.35 Canadian dollars, rounded to $500.