Question

If a nation's currency doubles in value on foreign exchange markets, the currency is said to ________, reflecting a change in the ________ exchange rate.

Answer 1

If a nation's currency doubles in value on foreign exchange markets, the currency is said to appreciate, reflecting a change in the nominal exchange rate.

What is the nominal and real exchange rate?

• The nominal exchange rate, abbreviated E, is the amount of local money required to purchase one unit of a particular foreign currency. A decrease in this indicator is referred to as nominal currency appreciation. (Under the fixed exchange rate regime, a decline in the exchange rate is referred to as a revaluation.) The term used to indicate a rise in this variable is nominal currency depreciation. Under the fixed exchange rate regime, an increase in rate E is referred to as devaluation.
• An accurate exchange rate R is defined as the difference between domestic and international prices, where domestic prices are calculated using the nominal exchange rate at the time. Formally, R=(E.P*)/P, where P* stands for the domestic price level and P* for the international price level. The real exchange rate (R) is said to appreciate when it falls and depreciate when it rises. The real rate indicates how much more or how few fewer goods and services can be purchased for a certain amount overseas (after conversion into a foreign currency). In actuality, changes in the real exchange rate are more significant than changes in the rate itself.

Learn more about exchange rate: brainly.com/question/14231622

#SPJ4