Suppose residents of the Euro area consume relatively more of Eurozone countries’

export goods than residents of foreign countries. In other words, Eurozone countries export goods have a higher weight in the Eurozone HCPI (the HCPI is the “Harmonized” CPI created specially in order to be able to compare European countries’ inflation) than they do in other countries. Conversely, foreign exports have a lower weight in the Eurozone HCPI than they do abroad. What would be the effect on the euro’s real exchange rate with a rise in the European terms of trade

(the relative price of European exports in terms of European imports)?