n the year 2016 Country A's real effective exchange rate (REER) showed depreciation over the year 2012 value while the nominal effective exchange rate (NEER) showed an appreciation.

In the year 2016, Country B's real effective exchange rate (REER) showed an appreciation over the year 2012 value, while the NEER showed depreciation.

Refer to the information above to answer part (i) and (ii) of this question.

(i) What happened to the overall export competitiveness of (a) Country A and (b) Country B over the period of 2012 -2016? [3 marks]

(ii) During the 2012-2016 period, which country (Country A or Country B) has experienced a higher domestic inflation rate than that of its trading partners? [2 marks]