The following table shows the nominal and real exchange rates for two countries and two years (OECD, 2020a,b). The columnnames are the country codes (not the currency codes) and the exchange rates are expressed as the amount of the currency perunit of US dollar.NominalRealYearFRANZLFRANZL19960.77991.45480.79340.991620180.84681.44531.11950.9968d. For each countries and each year, what is the ratio P" /P, where Pis the price level in the country and P" is the pricelevel in the United States. Round your answer to the nearest fourth decimal.YearFRANZLNumber1996Number2018NumberNumbere. Answer this question for FRA. If we believe in the theory of purchasing power parity, what is likely to happen after 2018?i. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar innominal term.AppreciateDepreciateRemain unchangedl. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in realterm.AppreciateO DepreciateO Remain unchanged

Answered: and each year, what is the ratio P /P,…

and each year, what is the ratio P /P, where Pis the price level in the country and P* is the price states. Round your answer to the nearest fourth decimal.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following table shows the nominal and real exchange rates for two countries and two years (OECD, 2020a,b). The column
names are the country codes (not the currency codes) and the exchange rates are expressed as the amount of the currency per
unit of US dollar.
Nominal
Real
Year
FRA
NZL
FRA
NZL
1996
0.7799
1.4548
0.7934
0.9916
2018
0.8468
1.4453
1.1195
0.9968
d. For each countries and each year, what is the ratio P" /P, where Pis the price level in the country and P" is the price
level in the United States. Round your answer to the nearest fourth decimal.
Year
FRA
NZL
Number
1996
Number
2018
Number
Number
e. Answer this question for FRA. If we believe in the theory of purchasing power parity, what is likely to happen after 2018?
i. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in
nominal term.
Appreciate
Depreciate
Remain unchanged
l. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in real
term.
Appreciate
O Depreciate
O Remain unchanged

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