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Suppose 40% of Home trade is with country 1, 30% is with country 2 and rest is with country 2. Home's currency apperciates 10% against
Suppose 40% of Home trade is with country 1, 30% is with country 2 and rest is with country 2. Home's currency apperciates 10% against country 1, 16% against country 2 but depreciates 25% against country 3. Does home's effective exchange rate apperciated or depreciate? By how much?
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