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bluejean bluejean
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2 months ago
Newland has a fixed nominal exchange rate and has an overvalued real exchange rate. As a result, it would like to have a 20% depreciation of its real exchange rate. However, it does not want to devalue its nominal exchange rate and abandon its peg. If foreign inflation is currently 3%, how much would domestic prices need to change?

▸ Increase by 17.6%

▸ Increase by 22.6%

▸ Decline by 22.6%

▸ Decline by 17.6%
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Macroeconomics


Edition: 3rd
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iammtziammtz
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2 months ago
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Decline by 17.6%

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bluejean Author
wrote...

2 months ago
Good timing, thanks!
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Yesterday
Brilliant
wrote...

2 hours ago
this is exactly what I needed
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