Question: Between last year and this year, the CPI in Blueland rose from 100 to 110 and the CPI in Redland rose from 100 to 105.

Between last year and this year, the CPI in Blueland rose from 100 to 110 and the CPI in Redland rose from 100 to 105. Blueland's currency unit, the blue, was worth $1 (U.S.) last year and is worth 90 cents (U.S.) this year. Redland's currency unit, the red, was worth 50 cents (U.S.) last year and is worth 45 cents (U.S.) this year.
Find the percentage change from last year to this year in Blueland's nominal exchange rate with Redland and in Blueland's real exchange rate with Red-land. (Treat Blueland as the home country.) Relative to Redland, do you expect Blueland's exports to be helped or hurt by these changes in exchange rates?

Step by Step Solution

3.40 Rating (184 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

One blue was worth two reds both last year and this year so the... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

659-B-E-D-S (543).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!