If the real exchange rate is appreciating, the nominal exchange rate can be depr
ID: 1207687 • Letter: I
Question
If the real exchange rate is appreciating, the nominal exchange rate can be depreciating as long as:
a)(Price in home country / Price in foreign country) is rising faster than the nominal exchange rate is falling.
b)(Price in foreign country / Price in home country) is falling faster than the nominal exchange rate is falling.
c)(Price in home country / Price in foreign country) is falling faster than the nominal exchange rate is falling.
d)(Price in foreign country / Price in home country) is rising faster than the nominal exchange rate is falling.
Explanation / Answer
a)(Price in home country / Price in foreign country) is rising faster than the nominal exchange rate is falling.