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# in country x, a decrease in the average currency exchange

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VP
Joined: 30 Sep 2004
Posts: 1488
Location: Germany
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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 ?

a -5
b 0
c +5
d +10
e +15
VP
Joined: 13 Jun 2004
Posts: 1119
Location: London, UK
Schools: Tuck'08
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Kudos [?]: 31 [0], given: 0

CER 1% -> -5pts
AMR 1% -> 10 pts

I am not sure I understood well the problem
Manager
Joined: 08 Oct 2004
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Yeah I was also guessing 5, but there doesnt seem to be any logic for the 5 point decrease if there is a 1% increase on the CER.
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Manager
Joined: 13 Feb 2005
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Location: Lahore, Pakistan
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2% dec CER yields +10 ---->1% dec CER yields +5, hence 1% inc = -5
1% inc AMR yields +10

so 10-5 = +5

yeah..its C
Current Student
Joined: 28 Dec 2004
Posts: 3387
Location: New York City
Schools: Wharton'11 HBS'12
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Kudos [?]: 186 [0], given: 2

C it is....

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!

10-5=5
VP
Joined: 13 Jun 2004
Posts: 1119
Location: London, UK
Schools: Tuck'08
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Kudos [?]: 31 [0], given: 0

Christoph, I think I got it : it's D right ?

We just have 2 elements :

if there is a decrease in the average currency exchange rate - CER - of 2% -> 10-point increase in the national retail price index.
OR
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
VP
Joined: 18 Nov 2004
Posts: 1441
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"D" for me.

We know that only a decrease in CER makes the national point to go up, so I think we shud only consider the increase in AMR which wud effect, which will be +10.
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