When we measure the impact of exchange rate changes on a nation's trade balance, the bilateral exchange rates explain only part of the change. To assess the overall change, we need to calculate:
a. the home multilateral exchange rate, or real effective exchange rate.
b. a nation's income versus income changes in the rest of the world.
c. a nation's marginal propensity to consume imports.
d. the movement over time of the trade balance along with long-run expectations of the exchange rate.
Ans: a. the home multilateral exchange rate, or real effective exchange rate.
You might also like to view...
Inflation at a rate that exceeds 50 percent per month is called
A) megainflation. B) hyperinflation. C) super inflation. D) extreme inflation. E) skyflation.
Firms are able to price discriminate
A) when all customers are uninformed about quality differences. B) when no customers are uninformed about quality differences. C) when some customers are uninformed about quality differences. D) when there is full information about quality available to all customers.