If the price level in domestic country is 1

If the price level in domestic country is 1.0, the price level in the foreign country is 2.0, and it costs 10 units of foreign currency to buy 1 unit of domestic currency. Then the real exchange rate between the domestic country and the foreign country is ( 20/2/5 ) units of foreign goods per unit of domestic goods. 6. For this question, assume the interest parity condition holds. Also assume that the domestic interest rate is 9% and that the foreign interest rate is 6%. Given this information, we would expect that the domestic currency is expected to (appreciate /depreciate) by %. 9. Contractionary monetary policy in a flexible exchange rate regime will cause (an increase / a decrease) in the nominal exchange rate, E.