. Suppose that an American Car sells for $10,000, and a German car sells for e 1,600,000....
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Question:
. Suppose that an American Car sells for $10,000, and a German car sells for e 1,600,000. (a) What is the real exchange rate between American and the German car if the Nominal Exchange Rate is e 80 per dollar. (b) What is the real exchange rate between American and the German car if the Nominal Exchange Rate is e 160 per dollar. (c) Which currency has appreciated? Which currency has depreciated? (d) What will be the effect of such appreciation/depreciation on US imports, exports, and net exports?
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