Because the real exchange is composed of three variables that can all move simultaneously, many combinations of changes lead to a real appreciation of the pound (in this case). Which one of the following options is NOT a basic movement?
A) a decrease in the pound prices of U.S. goods, not holding the dollar prices constant
B) a decrease in the dollar prices of U.S. goods, holding the exchange rate and the pound prices of goods constant
C) an increase in the pound prices of goods, holding the exchange rate and the dollar prices of goods constant
D) an increase in the nominal exchange rate ($/?), holding the dollar prices and pound prices of goods constant
Answer: A
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