Suppose the dollar-real exchange rate is fixed but brazilian

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Reference no: EM13990711

1. a. Suppose the dollar/Real exchange rate is fixed but Brazilian prices are rising faster than U.S. prices. Is the Brazilian appreciating or depreciating in real terms?

b. If the dollar is appreciating against the British pound in nominal terms but depreciating against the pound in real terms, what do we know about British and U.S. inflation rates?

c. Suppose the nominal peso/dollar exchange rate is fixed. If the inflation rates in Mexico and the United States are constant (but not necessarily equal in both countries), will the real value of the peso/dollar exchange rate also be constant over time?

d. Does it make sense to borrow during times of high inflation because you can repay the loan in cheaper dollars?

Reference no: EM13990711

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