Between last year and this yeat the CPt in Bilueland rose trom 100 to TO and the

Question

Between last year and this yeat the CPt in Bilueland rose trom 100 to TO and the CPt in Redland rose from 100 to 105. Blurland's currency un, the biue, was worth $100 US) last year and is worth so.90 (uS) this year Redland's currency unit, the red, was worth so 50 (U S) sast year and is worth $04S (U.S ) tvs year Consider Eiueland as the home country Instructions: Enter your response rounded to one decamal place red blue. b. Calculate Biueland's nominal exchange rate wth Redland this year Instructions: Enter your response rounded to one decimal place. c. Calculate the percentage change in Blueland's nominal exchange rate from last year to thits year Instructions: Enter your response as an integer vakue Be certain to enter "o it required d. Calculate Blueland's real exchange rate with Redland last yeat Instructions: Enter your response rounded to one decimal place ] red/blue e Calculate Bluelands real exchange rate with Redland this year

Explanation / Answer

a) Nominal Exchange rate = P(blue land)/P(redlad)= 100/100 =1

b) Nominal Exchange rate (t+1) = P(blue land)/P(redland) = 110/105 = 1.05

c) ¡n nominal exchange rate ={ e(t+1)- e(t)}/e(t)=( 1.05-1)/1 =5%

d) E(t) = e(t)* P(blue land)/P(redlad)= 1*(100/100) = 1

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