Q 11 and Q 12 combined:

From base price levels of 100 in 2016, price levels in Malaysia (currency is MYR) and the United Arab Emirates (currency is AED) in 2019 stood at 104 and 111, respectively. Assume that (relative) PPP holds. The spot exchange rate in 2016 was 0.1395 AED per MYR.

Q 11: What should (according to PPP) the exchange rate have been in 2019? Give your answer in number of AED per MYR correct to 3 decimal places.

Q 12: If, in fact, the exchange rate (expressed as the number of AED per MYR) turned out in 2019 to be 0.1420, what can be said in respect of the currency movements over the period 2016 to 2019? Pick the most appropriate and accurate choice.

a) The MYR strengthened in nominal terms and strengthened in real terms. b) The AED strengthened in nominal terms and weakened in real terms. c) The MYR strengthened in nominal terms and weakened in real terms. d) The MYR weakened in nominal terms and weakened in real terms. e) The AED strengthened in nominal terms and strengthened in real terms. f) I have no idea but I am sure Oliver the Finance Pug knows the answer. g) Even Oliver the Finance Pug doesn't know this one.