Terrania is a fast growing economy that has productivity in tradables growing at 10% p.a. against productivity growth of 7% p.a. in its trading partner. Assume tradables make up 25% of output. What prediction would you make about Terrania's real exchange rate trend?

Answer rating: 100% (QA)

Based on the given information we can predict that Terranias real exchange rate will appreciate over time The real exchange rate is the relative price ... View the full answer