(c) Consider the case of the exchange rate between the U.S. dollar and German euro,...
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(c) Consider the case of the exchange rate between the U.S. dollar and German euro, where S is the nominal German-euro-per-U.S.- dollar exchange rate in Table 1. Indicate the formula and find the real exchange rate in year 2019 and 2020. Based on the findings, what can you conclude on the value of U.S. dollar relative to German euro? (Please use four decimal points) Table 3: Year S 2019 0.7 2020 0.9 Note: CPI stands for Consumer Price Index U.S. CPI 220 235 German CPI 102 107 (6 marks) (d) Policymakers may intervene in foreign exchange market if they prefer their currency value to remain stable relative to another currency. Explain how Australian policymakers anchor the value of their currency when there is an increase in the demand for Australian goods by Malaysian consumers
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