Describe What Has Happened to the Real Exchange Rate Value

question 24

Essay

Describe what has happened to the real exchange rate value of the dollar in each of the following examples:
(a) The U.S.price level rises by 10 percent, the European price level remains constant, and the nominal U.S.exchange rate falls by 10 percent.
(b) The U.S.price level rises by 9 percent, the European price level rises by 6 percent, and the nominal U.S.exchange rate falls by 2 percent.
(c) The U.S.price level falls by 2 percent, the European price level remains constant, and the nominal U.S.exchange rate rises by 4 percent.
(d) The U.S.price level remains constant, the European price level rises by 3 percent, and the nominal U.S.exchange rate rises by 2 percent.

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Definitions:

Varied

Characterized by diversity or difference; not uniform or consistent.

Federal Legislation

Laws passed by the federal government of a country, which apply to all regions and individuals within that country.

Constitutional Rights

Fundamental rights protected by the constitution, including freedom of speech, religion, and the right to fair treatment under the law.

Authoritative Person

An individual recognized or accepted as being in a position of authority or possessing a high level of knowledge and expertise in a particular field.