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Suppose the spot exchange rate S(NZD/AUD) is 1.1000 (NZD per AUD). What is the real exchange rate, Q(NZD/AUD), if the price level in New Zealand
Suppose the spot exchange rate S(NZD/AUD) is 1.1000 (NZD per AUD). What is the real exchange rate, Q(NZD/AUD), if the price level in New Zealand is 103 as compared to 112 in Australia? Note: NZD = New Zealand Dollars; AUD = Australian Dollars. Show all workings. Keep your answer to four decimal places. Interpret your answer with respect to the perspective of an Australian citizen buying goods in New Zealand with Australian Dollars (AUD). Q(x/y)=S(x/y)[PxPy]
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