a)
To determine: The dollar of Country A to get stronger or weaker.
Introduction:
The price of a country’s currency that in terms of another nation’s currency is the exchange rate. The rate of exchange can be either floating or fixed. The two components of the exchange rates are the foreign currency and the domestic currency.
b)
To determine: The relative inflation rates in Country U and Country A.
Introduction:
The rate where the prices increases for a period of time that results in a fall in the purchasing value of the money is the inflation rate.
c)
To determine: The relative nominal interest rates and real rates in Country U and Country A.
Introduction:
The interest rate that does not consider the inflation rate is the nominal interest rate. The rate of interest that a lender or saver gets after the inflation is the real interest rate.
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