Answers
Solution:
Effective Exchange rate (EER) = , where si refers to the exchange rate of US with country i, and wi refers to the share of volume of trade of US with country i.
So, percent change in exchange rate = wi*(%∆si)
= 0.3*(+0.1) + 0.2*(-0.1) + 0.5*(-0.02)
= 0.03 - 0.02 - 0.01
= 0
So, there is no change (or 0 percentage change) in the effective exchange rate.
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