We often distinguish real from nominal variables.
[4 points]
a) Explain the difference between the nominal and the real exchange rate.
[5 points] the nominal exchange rate doesn’t adjust, what happens to the real exchange rate? [3
b) If the local economy experiences a higher rate of price inflation than the United States and
points]
c) Explain why and how this change in the real exchange rate affects the level of the
country’s imports and exports.

Answer rating: 100% (QA)

a The nominal value is the economic value expressed in currency that is the currency unit It does not affect changes in prices or prices of goods and services that the currency can buy Therefore chang... View the full answer