If a dollar currently purchases 12.5 pesos and someone forecasts that in a year it will be 14 pesos, then the forecast is given in
A)real terms and implies the dollar will appreciate.
B)real terms and implies the dollar will depreciate.
C)nominal terms and implies the dollar will appreciate.
D)nominal terms and implies the dollar will depreciate.

Question

Quizplus · Accepted Answer

The forecast is given in nominal terms as it only mentions the exchange rate between the US dollar and the Mexican peso. It implies that the US dollar will appreciate as it will be able to purchase more Mexican pesos in the future compared to the current exchange rate.

If a Dollar Currently Purchases 12