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Exchange rates

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Question 9

A country experiences a 3% appreciation in its nominal exchange rate. During the same period, its domestic inflation rate is 2%, while the inflation rate of its main trading partners is 7%.

Assuming all other things remain equal, what is the most likely outcome for the country’s Real Exchange Rate (RER) and its international export price competitiveness?

A

The RER appreciates, and export price competitiveness decreases.

B

The RER depreciates, and export price competitiveness increases.

C

The RER depreciates, and export price competitiveness decreases.

D

The RER appreciates, and export price competitiveness increases.

Markscheme

Exchange rates Questions

  1. A Level
  2. /Economics
  3. /Exchange rates

30 exam-style questions on OCR A Level Economics Exchange rates. Each one has a worked solution and a mark scheme showing where the marks go.

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