Chapter 6 addressed the effect of transfers between countries, such as the indemnity imposed on Germany after World War I. Suppose a transfer occurs involving Poland and the Czech Republic. The equation given below shows the determination of the long-run nominal zloty/koruna exchange rate, Ez/k, as a function of the real zloty/koruna exchange rate, qz/k, and the nations' long-run price levels. (Note: the zloty (2) is the currency of Poland (P) and the koruna (k) is the currency of the Czech Republic (C). Pp and Pc are, respectively, the price levels in Poland and the Czech Republic.) Ez/k = 4z/k* (Pp/Pc) If a permanent transfer from the Czech Republic to Poland occurs, the nominal zloty/koruna exchange rate, E,/k wll O A. depreciate since the transfer will decrease Pp relative to Pc. O B. depreciate since the transfer will depreciate q k

Chapter 6 addressed the effect of transfers between countries, such as the indemnity imposed on Germany after World War I. Suppose a transfer occurs involving Poland and the Czech Republic. The equation given below shows the determination of the long-run nominal zloty/koruna exchange rate, Ez/k, as a function of the real zloty/koruna exchange rate, qz/k, and the nations' long-run price levels. (Note: the zloty (2) is the currency of Poland (P) and the koruna (k) is the currency of the Czech Republic (C). Pp and Pc are, respectively, the price levels in Poland and the Czech Republic.) Ez/k = 4z/k* (Pp/Pc) If a permanent transfer from the Czech Republic to Poland occurs, the nominal zloty/koruna exchange rate, E,/k wll O A. depreciate since the transfer will decrease Pp relative to Pc. O B. depreciate since the transfer will depreciate q k

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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