What will be the rate of change in the real exchange rate

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Café latte costs $3.25 in the U. S. and 3.00 euros in Germany. The spot exchange rate in the market is $1.10 per euro. PPP is determined based on the price of a latte.

If the price in the U. S. increased by 10%, the price in Germany increased by 10% and the nominal exchange rate increased by 10% (from 1.10 top 1.21) what will be the rate of change in the real exchange rate?

Reference no: EM131519329

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