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CFA Level I Capital Flows and the FX Market question

Economics / Capital Flows and the FX Market

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Capital Flows and the FX Market sample question

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Economics

Capital Flows and the FX Market

Over one year, the nominal USD/EUR exchange rate (US dollars per euro) rises by 2.0%. During the same year, euro-area consumer prices rise by 3.0% and US consumer prices rise by 1.0%. Using real USD/EUR = nominal USD/EUR x (CPI_euro area / CPI_US), the change in the real USD/EUR exchange rate is closest to:

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