ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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The following table shows the nominal and real exchange rates for two countries and two years (OECD, 2020a,b). The column
names are the country codes (not the currency codes) and the exchange rates are expressed as the amount of the currency per
unit of US dollar.
Nominal
Real
Year
FRA
NZL
FRA
NZL
1996
0.7799
1.4548
0.7934
0.9916
2018
0.8468
1.4453
1.1195
0.9968
d. For each countries and each year, what is the ratio P" /P, where Pis the price level in the country and P" is the price
level in the United States. Round your answer to the nearest fourth decimal.
Year
FRA
NZL
Number
1996
Number
2018
Number
Number
e. Answer this question for FRA. If we believe in the theory of purchasing power parity, what is likely to happen after 2018?
i. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in
nominal term.
Appreciate
Depreciate
Remain unchanged
l. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in real
term.
Appreciate
O Depreciate
O Remain unchanged
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Transcribed Image Text:The following table shows the nominal and real exchange rates for two countries and two years (OECD, 2020a,b). The column names are the country codes (not the currency codes) and the exchange rates are expressed as the amount of the currency per unit of US dollar. Nominal Real Year FRA NZL FRA NZL 1996 0.7799 1.4548 0.7934 0.9916 2018 0.8468 1.4453 1.1195 0.9968 d. For each countries and each year, what is the ratio P" /P, where Pis the price level in the country and P" is the price level in the United States. Round your answer to the nearest fourth decimal. Year FRA NZL Number 1996 Number 2018 Number Number e. Answer this question for FRA. If we believe in the theory of purchasing power parity, what is likely to happen after 2018? i. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in nominal term. Appreciate Depreciate Remain unchanged l. Indicate whether the currency of FRA will appreciate, depreciate, or remain unchanged, against the US dollar in real term. Appreciate O Depreciate O Remain unchanged
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