There are two neighbor countries, X and Y. Country X produces three goods, U, V,

Question

There are two neighbor countries, X and Y. Country X produces three goods, U, V, and W and the prices of these products are $150, $120, and $110, respectively. Country Y produces three goods, U', V', and W'. The prices of these three products are $145, $123, and $134, respectively. Assume that all the weights attached to all the goods are equal to 1. The nominal exchange rate for the currency of Country Y(E) is 1.44. What is the real exchange rate for Country X (e*)? . LI. (Round your answer to two decimal places.)

Explanation / Answer

E = e*(Px/Py)

E = 1.44*($150+$120+$110/$145+$123+$134)

E = 1.36

c, the specialized production and export of Commodities in country Y , and not in country X

Currency B has appreciated

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