Economics
7. Assuming a 7.2% increase in the nominal spot exchange rate (USD/EUR), the price level in the euro area decreases by 3% and the price level in the United States increases by 2%.
The change in the real exchange rate (%) is the closest:
A. 12.72%.
B. 1.94%.
C. -2.52%.
8. According to the Fisher effect, a decline in expected inflation is likely to reduce the inflation rate:
A. both nominal and real interest rates.
B. the nominal interest rate.
C. the real interest rate.
9. A large country wishes to increase its national welfare by imposing tariffs. Assuming that its trading partners do not retaliate, which of the following conditions must the large country meet in order to achieve its goal?
A. It must have a comparative advantage in the production of the imported good.
B. The deadweight loss must be smaller than the benefit of its improving terms of trade.
C. It must auction the import licenses for a fee to offset the decline in the consumer surplus.