Which of the Following Events Will Cause the Smallest Change

question 43

Multiple Choice

Which of the following events will cause the smallest change in the real exchange rate (ε) ?

• A)a 6% drop in E and a 6% increase in the foreign price level (P*)
• B)a 6% increase in the domestic price level (P)and a 6% reduction in P*
• C)a 6% drop in E and a 6% reduction in P*
• D)a 3% increase in E
• E) a 2% increase in E and a 2% increase in P

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