If the current spot rate is 2.10 (HC/FC) and the government undertakes policies to depreciate the currency 16%, what is the new spot rate? Note: 2.10 * 1.16 is not the right formula.

Based on this, what will be the immediate effect of the depreciation on the trade balance (it was at -249 before the depreciation). Please provide a numerical answer.

Answer rating: 100% (QA)

You are correct that simply multiplying the original exchange rate by 1 16 will not yield the correct new spot rate after a 16 depreciation This is be... View the full answer