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Suppose the annual rate of inflation in Taiwan is 6.66%, and the annual rate of inflation in Mexico is 5.99%. If the Mexican peso depreciates
Suppose the annual rate of inflation in Taiwan is 6.66%, and the annual rate of inflation in Mexico is 5.99%. If the Mexican peso depreciates relative to the Taiwan dollar by 4% in real terms, then which of the following would be correct?
a, Nominal exchange rate appreciation by 4.825%.
b. Nominal exchange rate depreciation by 3.393%.
c. Nominal exchange rate appreciation by 3.512%.
d. Nominal exchange rate depreciation by 4.603%.
e. There is no change in the nominal exchange rate.
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