Suppose That the Current Spot Exchange Rate of U

question 20

Multiple Choice

Suppose that the current spot exchange rate of U.S.dollars for Russian rubles is $0.15/1ruble.The price of Russian-produced goods increases by 8 percent, and the U.S.price index increases by 3 percent. According to PPP, the 8 percent rise in the price of Russian goods relative to the 3 percent rise in the price of U.S.goods results in a(n)

• A)depreciation of the Russian ruble by 5 percent.
• B)depreciation of the Russian ruble by 6 percent.
• C)appreciation of the Russian ruble by 5 percent.
• D)appreciation of the Russian ruble by 6 percent.
• E)depreciation of the Russian ruble by 7 percent.

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