CFA CFA Level 1 Question of the Week: Level 1 – Macroeconomics

Question of the Week: Level 1 – Macroeconomics

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    • MarkMeldrum
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      If the nominal USD/EUR exchange increased 9% over the last year, Eurozone CPI increased by 1.88% and US CPI increased by 1.02%, then:

      • A. the real exchange rate will be lower by approximately 9.86%.
      • B. the real exchange rate will be higher by approximately 9.08%.
      • C. the real exchange rate will be higher by approximately 9.86%.
    • MarkMeldrum
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      The correct answer is Option C. 

      The real exchange rate can be approximated by:

      %ΔSd/f + CPIf – CPId or by %ΔSP/B + CPIP – CPIB

      The change in the real exchange rate would then be approximately 9% + 1.88% – 1.02% ≈ 9.86%.

    • pinkmonkey
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      Are there any ways to remember this kind of formula?

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