Using belo ve exchange Country A in year 1 having set year 0's index equal to 100 in both cases. Construct your indices so a higher number means a less competitive exchange rate. Trade Country A exports to country B $68 mill in year 0 Country A exports to country C $78 mill in year 0 Exchange Rate (number of units to buy 1 unit of country A currency) Exchange rate AB= 200 in year 0, 190 in year 1 Exchange rate AC = 3 in year 0, 2.5 in year 1 I Price level Year 0 Country A 106 Country B 100 Country C 102 Year 1 120 97 105
Using belo ve exchange Country A in year 1 having set year 0's index equal to 100 in both cases. Construct your indices so a higher number means a less competitive exchange rate. Trade Country A exports to country B $68 mill in year 0 Country A exports to country C $78 mill in year 0 Exchange Rate (number of units to buy 1 unit of country A currency) Exchange rate AB= 200 in year 0, 190 in year 1 Exchange rate AC = 3 in year 0, 2.5 in year 1 I Price level Year 0 Country A 106 Country B 100 Country C 102 Year 1 120 97 105
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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D3)
Transcribed Image Text:Using the data below, calculate both the nominal and real effective exchange rate index for
Country A in year 1 having set year O's index equal to 100 in both cases. Construct your indices
so a higher number means a less competitive exchange rate.
Trade
Country A exports to country B $68 mill in year 0
Country A exports to country C $78 mill in year 0
Exchange Rate (number of units to buy 1 unit of country A currency)
Exchange rate AB = 200 in year 0, 190 in year 1
Exchange rate AC = 3 in year 0, 2.5 in year 1
|
Price level
Year 0
Year 1
Country A 106
120
Country B 100
97
Country C 102
105
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