Chapter 6 addressed the effect of transfers between countries, such as the indemnity imposed on Germany after World War I. Suppose a transfer occurs involving Poland and the Czech Republic. The equation given below shows the determination of the long-run nominal zloty/koruna exchange rate, Ez/k, as a function of the real zloty/koruna exchange rate, qz/k, and the nations' long-run price levels. (Note: the zloty (z) is the currency of Poland (P) and the koruna (k) is the currency of the Czech Republic (C). Pp and Pc are, respectively, the price levels in Poland and the Czech Republic.) Ez/k =9z/kx (Pp/Pc) If a permanent transfer from Poland to the Czech Republic occurs, the nominal zloty/koruna exchange rate, Ez/k will O A. appreciate since the transfer will increase Pp relative to Pc. OB. appreciate since the transfer will appreciate qz/k OC. depreciate since the transfer will depreciate qz/k

Chapter 6 addressed the effect of transfers between countries, such as the indemnity imposed on Germany after World War I. Suppose a transfer occurs involving Poland and the Czech Republic. The equation given below shows the determination of the long-run nominal zloty/koruna exchange rate, Ez/k, as a function of the real zloty/koruna exchange rate, qz/k and the nations' long-run price levels (Note: the zloty (z) is the currency of Poland (P) and the koruna (k) is the currency of the Czech Republic (C). PpP and PC are, respectively, the price levels in Poland and the Czech Republic.) Ez/k=qz/k(Pp/PC) If a permanent transter from Poland to the Czech Republic occurs. the nominal zlotylkoruna exchange rate, Ez/k will A. appreciate since the transfer will increase PP relative to PC Q. appreciate since the transfer will appreciate qz/k C. depreclate since the transfer will depreciate qzak