Problem
1. What is the policy trilemma?
2. What are the advantages and disadvantages of exchange-rate pegging?
3. Suppose a bottle of wine sells for $16 in California and for E10 in France. Assuming a nominal exchange rate of 0.75 euro per dollar,
a) Calculate the real exchange rate between U.S. wine and French wine.
b) Calculate the real exchange rate between U.S. wine and French wine if the domestic price of U.S. wine is now $12 a bottle.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.