Question
Suppose you are given the following information about price indices and the nominal exchange rates in the euro-zone and the United Kingdom Price Index in
Suppose you are given the following information about price indices and the nominal exchange rates in the euro-zone and the United Kingdom
Price Index in UK, June 2016: 101.0
Price Index in UK, March 2020: 108.6
Price Index in eurozone, June 2016: 100.77
Price Index in eurozone, March 2020: 105.13
Spot euro price of the pound, June 2016: 1.2982
Spot euro price of the pound, March 2020: 1.0170
- Please use this information to calculate the real exchange rate for the United Kingdom, both in 2016 and 2020. Please show your work. (12 pts)
- Would the change in the real exchange rate be expected to hurt or help exports from the United Kingdom to the euro-zone? (4 pts)
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