The current exchange rate between Argentina and Brazil is 06

The current exchange rate between Argentina and Brazil is 0.65 Brazilian Real/Argentinean Peso. 1.2. If Argentina succeeds in reducing the nominal exchange rate to 0.5 Real/Peso, what will be the long run effect on the price competitiveness of Argentinean goods relative to Brazilian goods? (Required-3 points possible.) 8000 characters remaining) Continue without saving

Solution

If the exchange rate changes from 0.65 to 0.5 Real / Arg Peso , it indicates that the currency value of Argentina Peso decreased with which, the production or output in the Argentina decreased on the whole. As a result of that, the Argentinian goods get to increase in the prices when compared to that of the Brazilian goods. at such situations , people get to opt for similar Brazilian goods which can make the condition even worse for Argentina on the whole.