Question: can you answer Section II Question 1: Real exchange rates Suppose you are given the following information about price indices and the nominal exchange rates

can you answer can you answer Section II Question 1: Real exchange rates Suppose

Section II Question 1: Real exchange rates Suppose you are given the following information about price indices and the nominal exchange rates in China and the United States Price Index in China, July 2005: 257.3460 Price Index in China, February 2019: 372.8223 Price Index in US, July 2005: 195.400 Price Index in US, February 2019: 252.776 Spot dollar price of the RMB, July 2005: 0.1216 Spot dollar price of the RMB, February 2019: 0.1484 a. Please use this information to calculate the real exchange rate for China, both in 2005 and 2019. Please show all work. (12 pts) b. Based on your answer from part (a), can you conclude that China's currency is now definitely overvalued or definitely undervalued relative to the US dollar? Carefully explain your conclusion. (6 pts)

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