The nominal exchange rate is 15 crowns per florin, the domestic price level is 6 florins/bottle, and the foreign price level is 2 crowns/bushel.(a)What is the real exchange rate?(b)What is the real exchange rate in the foreign country?(c)If the domestic price level rises to 8 florins/bottle, what must the nominal exchange rate become if the real exchange rate remains unchanged?
What will be an ideal response?
| (a) | 45 bushels/bottle |
| (b) | 1/45 bottle/bushel |
| (c) | 11.25 crowns per florin |
You might also like to view...
Why does the government intervene in the market for research, especially medical research?
What will be an ideal response?
Most of the world's economies are mixed economies because _________
a. a cartel of powerful transnational firms demands it. b. the market system of allocation is always best. c. the command system of allocation is always best. d. government intervention in an overall market system exists because markets fail when there is market power, a great deal of inequality, pollution externalities, or public goods.
The Social Security system in the United States today is
a. actuarially sound. b. composed of a private pension fund into which workers have paid and who will withdraw their invested funds upon retirement. c. currently in no danger of running out of money in the long run. d. no longer a "pay as you go" system.
A World View titled "Export Ratios" examines the openness of trade for several countries based on the trade to GDP ratio. According to the excerpt, which country exports the most as a percentage of GDP?
A. China. B. The United States. C. Sweden. D. United Arab Emirates.