One year ago, the exchange rate between the Czech koruna and the USD was USD/Kr 30.00. Since the koruna has depreciated by 12% against the USD. Meanwhile, the price levels in the USD remained the same, while Czech prices rose 8%.

a. What is the nominal exchange rate today?
b. What should the value have been the exchange rate today based on PPP and assuming
last year was ‘normal’?
c. Did the Czech koruna depreciate or appreciate in real terms, relative to the USD?

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Apologies for the confusion in my previous response Lets correct the calculations a What is the nomi... View the full answer