Question

Between last year and this year, the CPI in Blueland rose from 100 to 115 and the CPI in Redland rose from 100 to 110. Blueland’s currency unit, the blue, was worth $0.90 (U.S.) last year and is worth $0.75 (U.S.) this year. Redland’s currency unit, the red, was worth $0.60 (U.S.) last year and is worth $0.50 (U.S.) this year. Consider Blueland as the home country.

a. Calculate Blueland’s nominal exchange rate with Redland.
Instructions: Enter your response rounded to one decimal place.
Last year: ? red/blue
This year: ? red/blue
The percentage change in Blueland’s nominal exchange rate from last year to this year is:

Answer 1

Last year: The nominal exchange rate was 0.60 red/blue.

This year: The nominal exchange rate is 0.50 red/blue.

Therefore, the percentage change in Blueland's nominal exchange rate from last year to this year is approximately -16.7%.

Step-by-step explanation:

To calculate Blueland's nominal exchange rate with Redland, we need to divide the value of Redland's currency (red) by the value of Blueland's currency (blue).

Last year: The nominal exchange rate was 0.60 red/blue.

This year: The nominal exchange rate is 0.50 red/blue.

To calculate the percentage change in Blueland's nominal exchange rate from last year to this year, we can use the following formula:

Percentage change = ((New Value - Old Value) / Old Value) * 100

Percentage change = ((0.50 - 0.60) / 0.60) * 100

Percentage change = (-0.10 / 0.60) * 100

Percentage change ≈ -16.7%

Therefore, the percentage change in Blueland's nominal exchange rate from last year to this year is approximately -16.7%.