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Author Question: What is the real exchange rate between the dollar and the euro equal to? What will be an ideal ... (Read 91 times)

2125004343

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on: Jun 30, 2018
What is the real exchange rate between the dollar and the euro equal to?
 
  What will be an ideal response?

Question 2

Disposable income is National income
 
  A) less taxes collected from households and firms by the government.
  B) plus net taxes collected from households and firms by the government.
  C) less net taxes collected from firms by the government.
  D) less net taxes collected from households by the government.
  E) less net taxes collected from households and firms by the government.


zhanghao

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Reply #1 on: Jun 30, 2018
Answer to Question 1

Let
 Real dollar/euro exchange rate =
 Nominal exchange rate =
 Price of an unchanging basket in US = Pus
 Price of an unchanging basket in Europe = PE
Then,
= (  PE)/PUS
A rise in the real dollar/euro exchange rate is called a real depreciation of the dollar against the euro, a fall in purchasing power of the dollar.
A fall in the real dollar/euro exchange rate is called a real appreciation of the dollar against the euro, a rise in purchasing power of the dollar.

Answer to Question 2

E


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