Foreıgn Trade Deneme Sınavı Sorusu #1389811
How is the rate of change in the nominal exchange rate explained? What are they?
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It is explained by two factors: the rate of change in the real exchange rate and the inflation differential between two countries. |
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It is explained by four factors: the real exchange rate is constant, the domestic |
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It is explained by one factor: the real foreign exchange rate between countries is calculated. |
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It is explained by three factors: it does not measure the purchasing power of the domestic currency, it is known as the nominal foreign exchange rate and it causes depreciation or appreciation of a currency against other currencies. |
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It is almost explained by being not rational to calculate the real foreign exchange rate by using just one good. |
The rate of change in the nominal exchange rate is explained by two factors: the rate of change in the real exchange rate and the inflation differential between two countries. If we accept that the real exchange rate is constant, the difference between inflation rates of domestic and foreign countries is the basic factor that determines the rate of change in the nominal foreign exchange rate. Provided that the domestic inflation is higher than the foreign inflation, the change in the nominal exchange rate will be positive indicating an increase. The correct answer is " A ".
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