Because the real exchange is composed of three variables that can all move simultaneously,many combinations of changes lead to a real appreciation of the pound (in this case).Which one of the following options is NOT a basic movement?

Question

Because the real exchange is composed of three variables that can all move simultaneously,many combinations of changes lead to a real appreciation of the 	pound (in this case).Which one of the following options is NOT a basic movement?

Quizplus · Accepted Answer

Option A is not a basic movement because it involves changing the pound prices of U.S. goods without holding the dollar prices constant, which does not directly relate to the real exchange rate's basic components: the nominal exchange rate, the price level in the domestic country, and the price level in the foreign country.

Because the Real Exchange Is Composed of Three Variables That