Assume That the Price Levels in Two Countries Are Constant

question 59

Multiple Choice

Assume that the price levels in two countries are constant. In this situation, we know that:

• A) the real and nominal exchange rate must move together, changing by the same percentage.
• B) neither the real nor the nominal exchange rate can change.
• C) the nominal exchange rate can change, while the real exchange rate is constant.
• D) the nominal exchange rate will fluctuate more widely than the real exchange rate.
• E) the real exchange rate can change, while the nominal exchange rate is constant.

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