Reading 21: Currency Exchange Rate

Question 1

Foreign Price Level in Domestic Currency

21.x

Currency Exchange Rates

Answer 1

S_d/f is the spot exchange rate (quoted interms of the number of units of domestic currency per one unit of foreign currency) and P_f is foreign price level quoted in terms of the foreign currency.

Question 2

Real Exchange Rate_(d/f)

21.x

Currency Exchange Rates

Answer 2

S_d/f is the spot exchange rate (quoted interms of the number of units of domestic currency per one unit of foreign currency) and P_f is foreign price level quoted in terms of the foreign currency.

Define domestic price level, in terms of the domestic currency, as P_d

Question 3

Example of Real Exchange Rate_(d/f)

21.x

Currency Exchange Rates

Answer 3

S_d/f is the spot exchange rate (quoted interms of the number of units of domestic currency per one unit of foreign currency) and P_f is foreign price level quoted in terms of the foreign currency.

Define domestic price level, in terms of the domestic currency, as P_d

Question 4

Example of CHANGE in Real Exchange Rate_(d/f)

21.x

Currency Exchange Rates

Answer 4

S_d/f is the spot exchange rate (quoted interms of the number of units of domestic currency per one unit of foreign currency) and P_f is foreign price level quoted in terms of the foreign currency.

Define domestic price level, in terms of the domestic currency, as P_d

Question 5

Foreign Currency Swap

21.x

Currency Exchange Rates

Answer 5