Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. exhange rates and international finace exhange ra

EXHANGE RATES AND INTERNATIONAL FINACE EXHANGE RATES AND INTERNATIONAL FINANCE B. During a...

70.2K

Verified Solution

Question

Finance

EXHANGE RATES AND INTERNATIONAL FINACE

image

EXHANGE RATES AND INTERNATIONAL FINANCE

B. During a short visit to Poland, you realize that a representative basket of goods and services costs 530 Polish Zloty (PLN). Since you live in the Eur ozone, you already know that the same basket in the Eurozone costs 143 euros. Also, the nominal exchange rate (E) between the two currencies is Ee/PLN 0.23. a) Calculate the exchange rate that is consistent with the PPP and the real exchange rate of the PLN with respect to the euro. Comment on this finding. [Mark 1.0] b) If PPP holds in the long-run, explain which country will gain competitivenes and by how much during the period of adjustment to the long-run equilibrium. What do you expect about the determination of the inflation differential in the long run? [Mark 1.0]

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students