Essay
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?
Correct Answer:
Verified
Correct Answer:
Verified
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