Suppose That the Dollar Real Exchange Rate Falls by 10

question 148

Multiple Choice

Suppose that the dollar real exchange rate falls by 10% against the euro, 20% against the pound, and 25% against the yen. If the United States trades equally with each country, what is the percentage decline in the real effective exchange rate?

• A) 22.5%
• B) 18.3%
• C) 15.1%
• D) 20.3%

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Definitions:

Capital Gain Transactions

Deals involving the sale of an asset, such as stocks, bonds, or real estate, where the sale price exceeds the purchase price, resulting in income that can be taxed at preferential rates.

Form 1099-B

A form used by brokers and barter exchanges to report proceeds from transactions to the taxpayer and the IRS.

Form 8949

A tax form used by the IRS to report sales and other dispositions of capital assets.

Outstanding Receivables

are amounts owed to a business by its customers for goods or services delivered but not yet paid for.