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Using the data below, calculate both the nominal and real effective exchange rate index for Country A in year 1 having set year O's index
Using the data below, calculate both the nominal and real effective exchange rate index for Country A in year 1 having set year O's index equal to 100 in both cases. Construct your indices so a higher number means a less competitive exchange rate. Trade Country A exports to country B $68 mill in year 0 Country A exports to country C $78 mill in year 0 Exchange Rate (number of units to buy 1 unit of country A currency) Exchange rate AB = 200 in year 0, 190 in year 1 Exchange rate AC = 3 in year 0, 2.5 in year 1 | Price level Year 0 Year 1 Country A 106 120 Country B 100 97 Country C 102 105 Using the data below, calculate both the nominal and real effective exchange rate index for Country A in year 1 having set year O's index equal to 100 in both cases. Construct your indices so a higher number means a less competitive exchange rate. Trade Country A exports to country B $68 mill in year 0 Country A exports to country C $78 mill in year 0 Exchange Rate (number of units to buy 1 unit of country A currency) Exchange rate AB = 200 in year 0, 190 in year 1 Exchange rate AC = 3 in year 0, 2.5 in year 1 | Price level Year 0 Year 1 Country A 106 120 Country B 100 97 Country C 102 105
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