What is the real exchange rate between the dollar and the euro equal to?
What will be an ideal response?
Let
? Real dollar/euro exchange rate =
? Nominal exchange rate =
? Price of an unchanging basket in US = Pus
? Price of an unchanging basket in Europe = PE
Then,
= ( × PE)/PUS
A rise in the real dollar/euro exchange rate is called a real depreciation of the dollar against the euro, a fall in purchasing power of the dollar.
A fall in the real dollar/euro exchange rate is called a real appreciation of the dollar against the euro, a rise in purchasing power of the dollar.
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A) J and M B) J and G C) K and G D) K and M
The real interest rate can be approximated by
a. adding the nominal interest rate and the inflation rate b. subtracting the nominal interest rate from the inflation rate c. adding last year's nominal interest rate to this year's d. subtracting the inflation rate from the nominal interest rate e. none of the above
A person is dynamically consistent if:
A. lapses in his self-control never occur. B. his preferences over the alternatives available at some future date do not change as the date approaches or once it arrives. C. he always wants to follow through on his plans and intentions. D. All of these are necessary for dynamic consistency.
If you hold money in anticipation of household emergency expense, this represents the::
a. speculative demand for holding money. b. transactions demand for holding money. c. opportunity cost motive for holding money. d. precautionary demand for holding money. e. regressive cost of holding money.