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GLOBAL ECONOMICS (3.4/ 3.5 MONEY INTEREST RATES AND PRICES/ MONETARY…

- - - - IF REAL EXCHANGE RATE RISES (MORE HOME GOODS ARE NEEDED IN EXCHANGE FOR FOREIGN GOODS) WE SAY HOME HAS EXPERIENCED REAL DEPRECIATION
      - IF REAL EXCHANGE RATE FALLS (FEWER HOME GOODS ARE NEEDED IN EXCHANGE FOR FOREIGN GOODS) WE SAY HOME HAS EXPERIENCED A REAL APPRECIATION
      - REAL EXCHANGE RATE IS BELOW 1 BY X%: FOREIGN GOODS ARE RELATIVELY CHEAP: UNDERVALUED
      - REAL EXCHANGE RATE IS ABOVE 1 BY X%: FOREIGN GOODS ARE RELATIVELY EXPENSIVE: OVERVALUED
      - RATE OF INFLATION: THE RATE OF GROWTH OF THE PRICE LEVEL
      - BIG MAC INDEX: THE OVER OR UNDERVALUATION OF A CURRENCY AGAINST THE US DOLLAR GAUGED BY COMPARING RELATIVE PRICES OF A BIG MAC IN A COMMON CURRENCY AND EXPRESSING THE DIFFERENCE AS A PERCENTAGE DEVIATION FROM 1