If real exchange rate has fallen, which of the following might be true?

Domestic prices have risen

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Foreign prices have fallen

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Domestic prices have fallen

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Foreign prices have risen

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Solution

The correct options are
A
Domestic prices have risen

B
Foreign prices have fallen

If RER has fallen, foreign prices have fallen and domestic prices have risen.

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If real exchange rate has fallen, which of the following might be true?

The correct options are A Domestic prices have risen B Foreign prices have fallen If RER has fallen, foreign prices have fallen and domestic prices have risen.

The correct options are
A
Domestic prices have risen

B
Foreign prices have fallen

If RER has fallen, foreign prices have fallen and domestic prices have risen.