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?
(a) 5
(b) 8%
(c) 0%
You might also like to view...
The required reserve ratio ranges from
A) 0 to 3 percent. B) 0 to 7 percent. C) 3 to 30 percent. D) 0 to 10 percent.
On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. What is the value of investment?
A) 375 fish B) -375 fish C) 25 fish D) -25 fish