Please answer b and c using the information from the tables. United StatesAustraliaAustriaBelgiumCanadaDenmarkFranceGermanyb. Calculate the real exchange rate between Germany and the United States using the formulaXRDM/S X CPIU.S.CPI,Table 3. Consumer Price Indexes (CPI), 16 countries, 1999-2012Annual indexes: 1982-84 = 100ItalyJapanNetherlandsNorwaySpainSwedenSwitzerlandUnited KingdomR=GERc. Create a graph that includes both the real and the nominal exchange rate. Do the twovariables move together?20121999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011166.6 172.2 177.1 179.9 184.0 188.9 195.3 201.6 207.3 215.3 214.5 218.1 224.9 229.6197.0 205.7 214.8 221.2 227.2 232.6 238.8 247.3 253.1 264.1 268.8 276.6 285.8 290.8147.9 151.4 155.4 158.2 160.3 163.6 167.4 169.9 173.6 179.1 180.0 183.3 189.3 194.0148.3 152.1 155.8 158.4 160.9 164.3 168.8 171.9 175.0 182.9 182.8 186.8 193.4 198.9160.5 164.9 169.0172.8177.6 180.9 184.9 188.5 192.7 197.2 197.7 201.3 207.2 210.3162.0 166.8 170.7 174.8 178.5 180.5 183.8 187.3 190.5 197.0 199.6 204.2 209.8 214.9155.0 157.7 160.3 163.4 166.8 170.3 173.4 176.2 178.9 183.9 184.1 186.9 190.8 194.6140.0 142.0 144.8 146.9 148.5 150.9 153.2 155.7 159.2 163.3 163.9 165.8 169.6226.3 232.1 238.5 244.5 251.0 256.6 261.5 267.1 272.0 281.1 283.3 287.7 295.7121.8 121.0 120.1 119.0 118.7 118.7 118.3 118.7 118.7 120.3 118.7 117.8 117.5137.0 140.2 146.1 150.9 154.0 156.0 158.6 160.4 163.0 167.1 169.0 171.2 175.2186.6 192.4 198.2 200.8 205.7 206.6 209.9 214.7 216.3 224.5 229.2 234.9 237.8 239.6234.1 242.1 250.8 259.6 267.5 275.6 284.9 294.9 303.1 315.5 314.6 320.2 330.5 338.6195.1 196.9 201.6 206.0 209.9 210.7 211.7 214.5 219.3 226.8 225.7 228.3 235.1 237.2143.8 146.1 147.5 148.5 149.4 150.6 152.5 154.1 155.2 158.9 158.1 159.2 159.7 158.5194.3 200.1 203.6 207.0 213.0 219.4 225.6 232.8 242.7 252.4285.2173.0304.6117.5179.5251.1 262.7 276.3 FREDGerman Deutsche Marks to One U.S. Dollar2.32.22.12.01.91.81.71.6Germany / U.S. Foreign Exchange Rate (DISCONTINUED)May 1999Sep 1999Jan 2000Source: Federal Reserve Bank of St. LouisMay 20001985Sep 20001990Jan 2001May 20011995fred.stlouisfed.orgSep 2001

The Nominal Exchange Rate signifies the value of the domestic currency when compared to foreign…

b. Calculate the real exchange rate between Germany and the United States using the formula XRDMIS X CPIU.S. CPI GER R= c. Create a graph that includes both the real and the nominal exchange rate. Do the two variables move together?

b. Calculate the real exchange rate between Germany and the United States using the formula XRDMIS X CPIU.S. CPI GER R= c. Create a graph that includes both the real and the nominal exchange rate. Do the two variables move together?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please answer b and c using the information from the tables.

United States
Australia
Austria
Belgium
Canada
Denmark
France
Germany
b. Calculate the real exchange rate between Germany and the United States using the formula
XRDM/S X CPIU.S.
CPI,
Table 3. Consumer Price Indexes (CPI), 16 countries, 1999-2012
Annual indexes: 1982-84 = 100
Italy
Japan
Netherlands
Norway
Spain
Sweden
Switzerland
United Kingdom
R=
GER
c. Create a graph that includes both the real and the nominal exchange rate. Do the two
variables move together?
2012
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
166.6 172.2 177.1 179.9 184.0 188.9 195.3 201.6 207.3 215.3 214.5 218.1 224.9 229.6
197.0 205.7 214.8 221.2 227.2 232.6 238.8 247.3 253.1 264.1 268.8 276.6 285.8 290.8
147.9 151.4 155.4 158.2 160.3 163.6 167.4 169.9 173.6 179.1 180.0 183.3 189.3 194.0
148.3 152.1 155.8 158.4 160.9 164.3 168.8 171.9 175.0 182.9 182.8 186.8 193.4 198.9
160.5 164.9 169.0
172.8
177.6 180.9 184.9 188.5 192.7 197.2 197.7 201.3 207.2 210.3
162.0 166.8 170.7 174.8 178.5 180.5 183.8 187.3 190.5 197.0 199.6 204.2 209.8 214.9
155.0 157.7 160.3 163.4 166.8 170.3 173.4 176.2 178.9 183.9 184.1 186.9 190.8 194.6
140.0 142.0 144.8 146.9 148.5 150.9 153.2 155.7 159.2 163.3 163.9 165.8 169.6
226.3 232.1 238.5 244.5 251.0 256.6 261.5 267.1 272.0 281.1 283.3 287.7 295.7
121.8 121.0 120.1 119.0 118.7 118.7 118.3 118.7 118.7 120.3 118.7 117.8 117.5
137.0 140.2 146.1 150.9 154.0 156.0 158.6 160.4 163.0 167.1 169.0 171.2 175.2
186.6 192.4 198.2 200.8 205.7 206.6 209.9 214.7 216.3 224.5 229.2 234.9 237.8 239.6
234.1 242.1 250.8 259.6 267.5 275.6 284.9 294.9 303.1 315.5 314.6 320.2 330.5 338.6
195.1 196.9 201.6 206.0 209.9 210.7 211.7 214.5 219.3 226.8 225.7 228.3 235.1 237.2
143.8 146.1 147.5 148.5 149.4 150.6 152.5 154.1 155.2 158.9 158.1 159.2 159.7 158.5
194.3 200.1 203.6 207.0 213.0 219.4 225.6 232.8 242.7 252.4
285.2
173.0
304.6
117.5
179.5
251.1 262.7 276.3

FRED
German Deutsche Marks to One U.S. Dollar
2.3
2.2
2.1
2.0
1.9
1.8
1.7
1.6
Germany / U.S. Foreign Exchange Rate (DISCONTINUED)
May 1999
Sep 1999
Jan 2000
Source: Federal Reserve Bank of St. Louis
May 2000
1985
Sep 2000
1990
Jan 2001
May 2001
1995
fred.stlouisfed.org
Sep 2001

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