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Question 158

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Suppose that initially the nominal exchange rate was 40 rupees per dollar,but it is now 50 rupees per dollar.
-(Scenario: Exchange Rate between Canada and India) Refer to Scenario: Exchange Rate between Canada and India.If the nominal exchange rate is 50 rupees per dollar and the inflation rate in India is 25%,while the aggregate price level has remained unchanged in Canada,the real exchange rate between the Canadian dollar and the Indian rupee:


A) remains unchanged at 40.
B) remains unchanged at 50.
C) increases from 40 to 50.
D) increases by more than 25%.

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