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One year ago, the exchange rate between Czech koruna and the USD was USD/Kr 30.00. Since the koruna has depreciated by 12% against the USD.

One year ago, the exchange rate between Czech koruna and the USD was USD/Kr 30.00. Since the koruna has depreciated by 12% against the USD. Meanwhile the price levels in the USD remained the same, while Czech prices rose 8%. a. What is the nominal exchange rate today? b. What should the value have been the exchange rate today based on PPP and assuming last year was ‘normal’? c. Did the Czech koruna depreciate or appreciate in the real terms, relative to the USD?

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