Assuming No Change in the Nominal Exchange Rate,how Will a Decrease

question 185

Multiple Choice

Assuming no change in the nominal exchange rate,how will a decrease in the price level in the United States relative to France affect the real exchange rate between the two countries? (Assume the United States is the "domestic" country.)

• A)The real exchange rate will rise.
• B)The real exchange rate will fall.
• C)The real exchange rate will be unaffected.
• D)The impact on the real exchange rate cannot be predicted.

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Definitions:

Activation

In psychology, it refers to the arousal level of the nervous system, influencing alertness and readiness to respond.

Persistence

The continued or prolonged existence of something, especially in the face of adversity or challenges.

Performance

The act of executing or performing a task, action, or duty.

Intervening Variable

A variable that explains the relationship between two other variables, typically in a cause-and-effect relationship.