Question #105202
Consider the real exchange rate. Suppose that the nominal exchange rate is 30, which is 10% lower than the level predicted by the absolute PPP. Answer how much the real exchange rate is.
1
Expert's answer
2020-03-18T14:02:40-0400

Er=En×PfPdEr=En\times\frac{P_f}{P_d} = 30*0.9=27

Er - real exchange rate

En - nominal exchange rate

Pf/Pd - absolute PPP


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