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in country x, a decrease in the average currency exchange [#permalink]
16 Feb 2005, 01:47
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in country x, a decrease in the average currency exchange rate - CER - of 2% or an increase of the average mortgage rate - AMR - of 1% is reflected as a 10-point increase in the national retail price index. during one month , both the CER and the AMR increased by 1%. what would be the expected change in the national retail price index ?
If AMR increase by 1% that leads to a 10point increase....end of story...AMR increased by 1% therefor price index should increase by 10 points! if CER decrese prince index increases....by 10 points, if CER increases price point decreases....therefor 1% CER increase leades to -5 reduction in the index!
if there is a decrease in the average currency exchange rate - CER - of 2% -> 10-point increase in the national retail price index.
if there is an increase of the average mortgage rate - AMR - of 1% -> 10-point increase in the national retail price index.
so we can not assume the effects if there is :
an increase of CER
a decrease of AMR
it would just be assumptions
Moreover the 2 conditions are linked with "OR" wich means that one condition is enough to get the result, and as we don't know the consequences of a 1% increase in CER...
just the increase of AMR is verified so it leads to answer D