Author Question: The effect of trade on specialized employees of exporting industries will be ________ jobs and ... (Read 90 times)

jake · **on:** Jun 30, 2018

The effect of trade on specialized employees of exporting industries will be ________ jobs and ________ pay because they are relatively ________.

A) more; higher; immobile
B) fewer; lower; immobile
C) fewer; lower; mobile
D) more; lower; immobile
E) more; higher; mobile

Question 2

What is the real exchange rate? What is its relationship to the current account?

What will be an ideal response?

jaygar71 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

Defined as: EP /P (the exchange rate multiplied by foreign prices, divided by domestic prices).
While the nominal exchange rate measures how much of a foreign currency one can buy with a unit of domestic currency, the real exchange rate measures how many goods and services one could buy.
A rise in the real exchange rate (a depreciation of domestic currency) means that domestic goods are cheaper compared to foreign goods, so exports increase and imports decrease. Aggregate demand increases and the CA rises. A fall in the real exchange rate has the opposite effect: Aggregate demand decreases and the CA falls.