Assume a two-country model with tradable and non-tradable goods. Both countries

spend half of income on non-tradable goods. The price of tradable goods is the same in

both countries when measured in the same currency:. Now assume that due to

technological progress productivity in the tradables sector improves by 20% in the

domestic country and by 30% in the foreign country. [For example, instead of 10

workers to produce a tradable good, it now takes 8 workers in the domestic country

and 7 workers in the foreign country]. From the perspective of the domestic country,

by what percent does the real exchange rate appreciate or depreciate?