Reading check 6: Due on Friday in class. 1. Which of the following, all else fixed, will cause the real exchange rate to increase? (consider nominal exchange rate measure as US$ per €) a. a nominal depreciation of the dollar. b. a reduction in the foreign price level. c. a reduction in the domestic price level. d. a and c.* 2. A nominal depreciation of the Mexican peso (against all currencies) indicates that: (consider nominal exchange rate measure as Mexican $ per any other unit of currency) a. the peso price of foreign currency has fallen. b. the Mexican real exchange rate will not change if the price level in Mexico falls. c. the peso price of, for example, the U.K. pound has increased.* d. the number of units of foreign currency that one can obtain with one peso has increased. 3. Which of the following is true when a county is experiencing a trade deficit? a. demand for domestically produced goods is equal to the domestic demand for goods. b. demand for domestically produced goods is greater than the domestic demand for goods.
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