The interest rate in the US is 4%, the rate in Brazil is 5%, and the expected rate of depreciation of Brazilian real is 1%. Which pillar of the incompatible trinity is Brazil sacrificing in this example of uncovered interest parity, fixed exchange rate. Sell dollars on forex markets to keep the rate of depreciation at zero, do not touch the interest rates The nominal exchange rate of the yuan is 0.17 dollars. The price of a big mac in China is 21.2 yuan and in the US $6. Find the real exchange rate. (1) What are the units to the previous question? (2) Is the yuan under or overvalued?
The interest rate in the US is 4%, the rate in Brazil is 5%, and the expected rate of depreciation of Brazilian real is 1%. Which pillar of the incompatible trinity is Brazil sacrificing in this example of uncovered interest parity, fixed exchange rate. Sell dollars on forex markets to keep the rate of depreciation at zero, do not touch the interest rates The nominal exchange rate of the yuan is 0.17 dollars. The price of a big mac in China is 21.2 yuan and in the US $6. Find the real exchange rate. (1) What are the units to the previous question? (2) Is the yuan under or overvalued?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The interest rate in the US is 4%, the rate in Brazil is 5%, and the expected rate of
The nominal exchange rate of the yuan is 0.17 dollars. The
(1) What are the units to the previous question?
(2) Is the yuan under or overvalued?
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