The market price of existing bonds is ________ to the rate of interest prevailing in the economy

Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4

(a) What is the nominal exchange rate? (b) Suppose the real exchange rate rises by 10%, the inflation rate in the domestic country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change? (c) Suppose the nominal exchange rate rises by 5%, the real exchange rate rises by 8%, and domestic inflation is 3%. What is the foreign inflation rate?

If nominal GDP increases, which of the following will always take place?

A) Output will have increased but prices will have fallen or remained the same. B) Prices will have increased but output will have fallen or remained the same. C) Both output and prices will have increased. D) none of the above