If we set the real effective exchange rate index between the United Kingdom and the United States equal to 100 in 2010, and find that the U.S. dollar has changed to a value of 91.4, then from a competitive perspective the U.S. dollar is

Question

Quizplus · Accepted Answer

A decrease in the exchange rate from 100 to 91.4 means that the U.S. dollar has depreciated relative to the British pound. This makes British goods more expensive for U.S. consumers, and U.S. goods cheaper for British consumers. Thus, the U.S. dollar is undervalued from a competitive perspective.

If We Set the Real Effective Exchange Rate Index Between