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7-3. Real Effective Exchange Rate Index. What formula is used to convert a nominal effective exchange rate index into a real effective exchange rate index? RNFCC
30 Eiteman/Stonehill/Moffett •Multinational Business Finance,Twelfth Edition 7-4. Real Effective Exchange Rates: Japan and the United States. Exhibit 7.3 compares the real effective exchange rates for Japan and the United States. If the comparative real effective exchange rate was the main determinant, does Japan or the United States have a competitive advantage in exporting? Which of the two has an advantage in importing? Explain why. 7-5. Exchange Rate Pass-Through. Incomplete exchange rate pass-throughis one reason that a country’s real effective exchange rate can deviate for lengthy periods from its purchasing power equilibrium level of 100.What is meant by the term exchange rate pass-through?