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Assume that the nominal exchange rate is equal to 10 Hong Kong dollar/British pound, the UK inflation rate level is equal to 1% and the

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Assume that the nominal exchange rate is equal to 10 Hong Kong dollar/British pound, the UK inflation rate level is equal to 1% and the Hong Kong inflation rate level is equal to 5%. The real exchange rate is then equal to O A 10.40 Hong Kong dollar/British pound OB 9.62 Hong Kong dollar/British pound. OC 8.44 Hong Kong dollar/British pound, OD. 15.02 Hong Kong dollar/British pound

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