× a. 15 Assignment cl Not secure l ezto.mheducation.com/hm.tpx Between last year

Question

× a. 15 Assignment cl Not secure l ezto.mheducation.com/hm.tpx Between last year and this year, the CPI in Blueland rose from 100 to 110 and the CPI in Rediland rose from 100 to 106 Blueand's currency unit, the blue, was worth $10(U S ) last year and s worth $0 90 (US) this year, Redlands currency urn. the red, was worth $0.50 (U.S) last year and is worth $0.45 (U.S) this year. Consider Blueland as the home country s. Cakculate Blueland's nominal exchange rate with Redland last year Instructions: Enter your response rounded to one decimal place. red/blue b. Calculate Blueland's nominal exchange rate with Redland this year. Instructions: Enter your response rounded to one decimal place red blue e. c Calculate the percentage change in Blueland's nominal exchange rate from last year to this year Instructions: Enter your response as an integer value. Be certain to enter "0" if required d. Calculate Blueland's real exchange rate with Redland last year Instructions: Enter your response rounded to one decimat place red blue e Celculate Blueland's real exchange rate with Reoland thia year Instructions: Enter your response rounded to three decimal places reditbtue t Celculate the percentage change n Buelands real exchange rate with Redpn Instructions: Enter your response rounded to three decimal places

Explanation / Answer

Consider the problem here let’s say there are 2 country of named “Blue Land” and “Red Land”.

a)

So, in the last year the price of “the blue” is “$1” and the price of “the Red” is “$0.5”.

So, price of 2 “the red” be “2*0.5=$1”.

So, 1 “The Blue” is equivalent to 2 “the Red”, => to purchase 1 unit of “The Red” we need “0.5” the Blue. So in the last year the nominal exchange rate for BLUE is “0.5”.

b)

Now, in this year the price of “the blue” is “$0.9” and the price of “the Red” is “$0.45”.

So, price of 2 unit of “The Red” be “2*0.45=$0.9”.

So, 1 unit of “The Blue” is equivalent to 2 unit of “the Red”, => to purchase 1 unit of “The Red” we need “0.5” the Blue. So in this year the nominal exchange rate for BLUE is “0.5”

c).

here the % change in the exchange rate is “0”, because the exchange rate is remain same.

d).

here in the last year, the CPI for BLUE LAND is “100” and for “ RED LAND” is also “100”, so the “real exchange rate = nominal exchange rate*(Foreign Price/ Home Price ).

“R=E*(Pf/Ph) = (0.5)*(100/100)=0.5.

So, in the last year “BLUE’s” real exchange rate is “0.5” same as the nominal exchange rate.

e).

So, the BLUE’s exchange rate for this year be, “0.5*(105/*110)=0.477 < 0.5.

f).

So, the % change in R is given by, (0.477 – 0.5)/0.5 = (-0.023)/0.5=(-0.046).

So, it reduces by “4.6%”.

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