When considering the change in price of a country's imports when foreign currencies depreciate by 10% relative to the home country, the "elasticity of exchange rate pass-through" would be equal to Select one: a. 1.0 if there were no "pass-through." b. 1.0 if there were complete "pass-through." c. zero if there were complete "pass-through." d. 10% if there were complete "pass-through.

If the nominal exchange rate e is foreign currency per dollar, the domestic price is P, and the foreign price is P*, what is the definition of the real exchange rate?

QUESTION 3 Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. Initially, the supply curve for USD is 100+ e . bln dollars per week and the demand curve is 140 - e bln dollars per week. There is a financial crisis in Mexico and the government fears that it may lead to capital outflows that would make the crisis even worse. They decide that if Mexican Peso depreciates by more than 20%, the central bank will step in and fix the exchange rate. As the crisis unfolds the demand for the U.S. dollars increases to 142 - e and the supply of dollars falls to 99+e . How should the central bank of Mexico react to this change? O A. start selling U.S. dollars to support the exchange rate O B. start buying U.S. dollars to support the exchange rate O C. reduce money supply in the economy O D. do nothing

A There are two countries in the world, A and B. Suppose the central bank in country A has an annual inflation target π = 0.02 while the central bank in country B has an 0.03. In the long run, we would expect the nominal exchange rate of country A to appreciate against country B at a rate of about 1% per year. annual inflation target B True or False? Explain. -*