ECON 2450 Study Guide - Quiz Guide: Neutrality Of Money, Real Interest Rate, Enom
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Read each part of the question very carefully. Show all the steps of your calculations to get full marks. Home makes ordinary soap bars that are sold for 5 dollars each. Foreign makes deluxe soap bars that are sold for 100 yens each. The real exchange rate between home and foreign is a half of the deluxe soap bar per ordinary soap bar. (i) what is the nominal exchange rate between the home dollar and the. The price level in home is ph = 5 dollars per ordinary soap bar. The price level in foreign is pf = 100 yens per deluxe soap bar. The real exchange rate, e, is of a deluxe soap bar per ordinary soap bar. (i) the general formula for the real exchange rate is e = Eq. (1) can be also written as e bom ep.
