Question $7$

The USA does $40\%$ of its trade with the Europe and $60\%$ of its trade with China. The

nominal exchange rate index of the Euro per dollar has moved from $100$ to $120,$ while the

nominal exchange rate of the Chinese Renminbi per dollar has moved from $100$ to $80.$

Assuming the initial nominal effective exchange rate of the dollar was $100$ in the base

period then the nominal effective exchange rate of the dollar will have:

A$)$ appreciated to $104$

B$)$ depreciated to $104$

C$)$ appreciated to $96$

D$)$ depreciated to $96$

E$)$ It is not possible to say from the information given