that there has been a gain in the country’s competitiveness.

that absolute purchasing power parity has increased.

that it leads to arbitrage resulting in an appreciation of the real exchange rate in the future.

all of the above

the rate of inflation plus the real rate of interest.

the nominal rate of interest, assuming the Fisher Principle holds

the difference between the rate of growth of the money supply and the rate of inflation

the difference between the foreign and domestic inflation rates

0 = (Y1 - C1) + (Y2 - C2 )/(1+r)

C1 + C2/(1+r) = ?

(Y1 - C1) = (Y2 - C2 )/(1+r)

C1 + C2/(1+r) = Y1 +Y2/(1+r)

OB

DB

OY1+OY2

The area of the rectangle OY1AY2

F(K)/(1+r) minus K

F(K) minus K/(1+r)

F(K) minus K

K times (1+r)