Question:
Suppose massive capital outflows cause nominal exchange rate to depreciate by 10%. At the same time, foreign and domestic price levels rise by 5% and 20% respectively. What will be the approximate change in real exchange rate?
Suppose massive capital outflows cause nominal exchange rate to depreciate by 10%. At the same time, foreign and domestic price levels rise by 5% and 20% respectively. What will be the approximate change in real exchange rate?
Updated On: Mar 21, 2025
- Depreciation by 2.5%
- Depreciation by 5%
- Appreciation by 25%
- Depreciation by 25%
Hide Solution
Verified By Collegedunia
The Correct Option is A
Solution and Explanation
The correct option is(A): Depreciation by 2.5%
Was this answer helpful?
1
1
Top Questions on Foreign exchange market
- Match List-I with List-II \[\begin{array}{|c|c|} \hline \textbf{Concepts} & \textbf{Their meaning} \\ \hline \text{(A) Foreign Exchange Swaps} & \text{(I) is a forward contract for standardized currency amounts and selected calendar dates traded on an organized market.} \\ \hline \text{(B) Forward Transaction} & \text{(II) refers to the avoidance of a foreign exchange risk or covering of an open position.} \\ \hline \text{(C) Foreign Exchange Futures} & \text{(III) refers to a spot sale of a currency combined with a forward repurchase of the same currency as part of a single transaction.} \\ \hline \text{(D) Hedging} & \text{(IV) refers to an agreement today to buy or sell a specified amount of a foreign currency at a specified future date at a rate agreed upon today.} \\ \hline \end{array}\] Choose the correct answer from the options given below:
- CUET (PG) - 2025
- Economics
- Foreign exchange market
- Read the following statements carefully:
Statement 1: The price of a given currency in terms of another is known as bank rate.
Statement 2: Demand curve for foreign exchange is a downward sloping curve.- CBSE CLASS XII - 2025
- Economics
- Foreign exchange market
- Identify, which of the following is not a source of demand for foreign exchange.
- CBSE CLASS XII - 2025
- Economics
- Foreign exchange market
- For a given foreign currency, if the forward exchange rate of delivery is 20 and the current value of spot exchange rate is 8, then the forward premium will be _________ (rounded off to two decimal places).
- GATE XH-C1 - 2024
- International Economics
- Foreign exchange market
From the following data, estimate the value of Net Indirect Taxes (NIT):
- GATE XH-C1 - 2024
- Economics
- Foreign exchange market
View More Questions
Questions Asked in CUET PG exam
- What is the main objective of the National Education Policy (NEP) 2020 regarding language?
- CUET (PG) - 2026
- Vocabulary
- Fill in the blank with the correct preposition: "He has been living here ___ 2010."
- For a saturated soil mass, how is shear strength calculated using effective stress parameters?
- CUET (PG) - 2026
- Soil Mechanics
- What is the primary purpose of the uniqueness theorem in elastic analysis?
- CUET (PG) - 2026
- Soil Mechanics
- Which method is used to determine the collapse load in structural analysis?
- CUET (PG) - 2026
- Soil Mechanics
View More Questions