If the Nominal Exchange Rate in Dollars Per Pound Rises

question 34

Multiple Choice

If the nominal exchange rate in dollars per pound rises by 5%,the U.S.inflation is 2%,and the U.K.inflation is 0%,what is the percent change in the real exchange rate?

• A) 7%
• B) 5%
• C) 3%
• D) 2%

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Definitions:

LIFO Method

LIFO method, or Last-In, First-Out, is an inventory valuation method where the most recently produced or acquired items are the first to be sold, affecting cost of goods sold and inventory valuation.

Inventory Profits

The increase in net income that occurs when a company sells its inventory for more than it cost to produce or purchase.

Lower Of Cost Or Market

An accounting principle requiring companies to value inventory at the lower of its historical cost or current market price.

Inventory Valuation

The cost associated with an entity's inventory at the end of a reporting period, calculated using methods like FIFO, LIFO, or Weighted Average.