Homework Answers
Note that the real exchange rate is given by,
Real exchange rate = (nominal exchange rate * domestic price) / (foreign price)
Now,
if the nominal exchange rate decreases, Real exchange rate decreases
if the foreign price increases, Real exchange rate decreases
and there would not be effect of domestic prices as same is kept constant.
Hence,
Overall effect of these change causes decrease in real exchange rate
hence,
real exchange rate depreciates is the correct option
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QUESTION 4 Suppose that domestic price level is constant and foreign price level increases and the...
Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign...
Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. What is the nominal exchange rate? (3%) a. Suppose the real exchange rate rises by 10%, the inflation rate in the domestic b. country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change? (3%) Suppose the nominal exchange rate rises by 5%, the real exchange rate rises by...
(1) If the world price is above the domestic equilibrium price, the domestic country is likely...
(1)
If the world price is above the domestic equilibrium price, the
domestic country is likely to ____________________ the good.
(2)
The difference between what an economy sells to and buys from
foreigners is _________________.
(3)
The idea that exchange rates and prices adjust to equalize the
cost of living across international boundaries is called
__________________________.
(4)
In the graph below, when the world price is $3, how many units
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19. If the nominal exchange rate falls 10 percent, the domestic price level rises 4 percent,...
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1.) $802, $902, $1,002, $1,202
2.) increases/decreases
3.) depreciates/appreciates
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4. Assume that the nominal exchange rate increases by 2%. If prices (both domestic and foreign...
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7 Fill in the missing information in each of the follow- ing examples. Real Nominal Domestic Price Foreign Price Ex...
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Need answer for both 3 questions Question 14 (1 point) Suppose that over the past decade,...
Need answer for both 3 questions
Question 14 (1 point) Suppose that over the past decade, U.S. inflation is greater than that in Japan. Further assume that during this same period, the U.S. dollar appreciates relative to the Japanese yen, Given this information, and assuming Japan as the domestic economy, 1) the real exchange rate remains unchanged. 2) the real exchange rate must increase. 3) the real exchange rate can decrease or remain the same, but not increase. 4) the...
The nominal exchange rate (E) as defined in the text represents the price of domestic currency...
The nominal exchange rate (E) as defined in the text represents the price of domestic currency in terms of foreign currency. none of the above the number of units of foreign currency you can obtain with one unit of domestic currency. the number of units of domestic goods you can obtain with one unit of foreign goods. both A and C For this question, suppose the domestic interest rate is 4% and that the foreign interest rate is 7%. And...
Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. What is the nominal exchange rate? (3%) a. Suppose the real exchange rate rises by 10%, the inflation rate in the domestic b. country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change? (3%) Suppose the nominal exchange rate rises by 5%, the real exchange rate rises by...
(1)
If the world price is above the domestic equilibrium price, the
domestic country is likely to ____________________ the good.
(2)
The difference between what an economy sells to and buys from
foreigners is _________________.
(3)
The idea that exchange rates and prices adjust to equalize the
cost of living across international boundaries is called
__________________________.
(4)
In the graph below, when the world price is $3, how many units
are...
19. If the nominal exchange rate falls 10 percent, the domestic price level rises 4 percent, and the foreign price level rises 6 percent, the real exchange rate will fall: A) Opercent. B 8 percent. C) 10 percent. D) 12 percent.
1.) $802, $902, $1,002, $1,202
2.) increases/decreases
3.) depreciates/appreciates
6. Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate speofies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for November 26, 2014, in terms of U.5. dollars per unit of foreign curreno, Ue the information in the table to...
4. Assume that the nominal exchange rate increases by 2%. If prices (both domestic and foreign do not change), we know that domestic goods are relatively. _(cheaper / more expensive) and that foreign goods are relatively _(cheaper / more expensive).
7 Fill in the missing information in each of the follow- ing examples. Real Nominal Domestic Price Foreign Price Exchange Exchange Example Rate Rate Level Level (a) In (a) 6 100 100 ес (b) 6 110 100 ra (c) 6 100 110 (d) 6 100 110 (e) 6 100 110 What conclusions regarding real and nominal exchange rates do these examples suggest?
Need answer for both 3 questions
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