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According to purchasing-power-parity theory, exchange rates should eventually adjust to equate the purchasing power of various currencies.Conversely, due to a change in exchange rates, countries' purchasing power for the same unit of goods varies.

In practice, however, exchange rates are often very slow to adjust to equate the purchasing power of various currencies and thereby take a long time to achieve "purchasing power parity."

The price of an iPhone in U.S. dollars is $300. At the given exchange rate of $0.85 CAD = $1 U.S., the price of the iPhone in Canadian dollars will be:

$$\begin{gathered} 1\mathrm{US}=0.85\mathrm{CAD} \\ 300\mathrm{US}=0.85×300 \\ =\$255\mathrm{CAD} \end{gathered}$$

The price of an iPhone in Canadian dollars is $255 CAD.

The exchange rate between Canada and the U.S. has changed due to the appreciation of U.S. dollars. At the new exchange rate of $0.96 CAD = $1 U.S., the price of the iPhone in Canadian dollars will be

$$\begin{gathered} 1\mathrm{US}=0.96\mathrm{CAD} \\ 300\mathrm{US}=0.96×300 \\ =\$288\mathrm{CAD} \end{gathered}$$

The price of an iPhone in Canadian dollars is $288 CAD.

Since the value of Canadian dollars has depreciated (appreciation of U.S. dollars), it has become costly to purchase the iPhone from the U.S. Thus, imports of the iPhone in Canada will fall.