Calculate the us real exchange rate against the euro

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Reference no: EM131220759

Suppose it takes $1.05 to buy 1 euro, the U.S. price level is 120, and the European price level is 125.

a. Calculate the U.S. real exchange rate against the euro.

b. Suppose the U.S. price level rises to 130. Calculate the real exchange rate again and explain why it has risen or fallen.

Reference no: EM131220759

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