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In January 2017:
The currency in Norway is Korne. Norway had an inflation rate of 3.5.
The currency in US is Dollar. US had an inflation rate of 2.1.
The published exchange rate in Norway was 8.396 Krone per Dollar.
Answer the following questions given the January 2017 short-run trend in the exchange rate for Dollar in Norway, ceteris paribus? Show your work.
a) What will be the nominal exchange rate one year after January 2017?
b) What will be the published exchange rate one year after January 2017? Explain why.
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