Answer
a) increases
b) decreases
c) decreases
d) decreases
Work Step by Step
a) Domestic prices are increasing while international prices are flat, so the exchange rate increases.
b) Foreign prices are increasing while domestic prices are flat, so the exchange rate decreases.
c) Neither domestic nor international prices are changing, so those effects are nullified. Since the domestic nominal exchange rate is decreasing, the real exchange rate would also decrease.
d) With prices increasing internationally faster than in the U.S., and with the decreased nominal exchange rate, the real exchange rate declines.
