Three years ago, the USD/EUR exchange rate was 478.16 and today the exchange rate is now at USD/EUR 485.71. The euro inflation rate has been at rates of 1.44%,1.08% and 1.55% over the last 3 years. In the US, the inflation rates have been 1.8%, 2.4% and 2.1%.
 

(a) Calculate today's real FX value of the USD adjusted for the past three year's inflation differential (show all working).

(b) Has the USD appreciated or depreciated in real terms over the three-year period against the Armenian Dram? By how much has its value changed in real terms (answer in percentage terms)? Clearly explain and show how it is that you know this.

Answer rating: 100% (QA)

Those yoaus Ago Today 1 USD 47816 AMD 1 USD 48571 ... View the full answer