Question 4 State the impact of each of the following changes (other variables remaining unchanged) on the real exchange rate. (a) The Consumer Price Index (which measures the price level) in the...

Question 4

State the impact of each of the following changes (other variables remaining unchanged) on the real exchange rate.

(a) The Consumer Price Index (which measures the price level) in the United States rises by 4 percent.

(b) The Consumer Price Index in Jamaica rises by 9 percent.

(c) The two Consumer Price Index changes above occur at the same time.

(d) The nominal exchange rate moves from 86 to 90 for a U.S. dollar.

(e) The nominal exchange rate depreciates by 10 percent at the same time that local inflation is 10 percent and the U.S. price level is stable.