Suppose the real exchange rate is 1.25 pounds of bananas in Guatemala per pound of bananas in the U.S. If a pound of bananas in the U.S. costs $.50, and the exchange rate is 10 Guatemalan Quetzals per dollar, what is the price of bananas in Guatemala?
a. 2.50 Quetzals per pound
b. 4.00 Quetzals per pound
c. 5.75 Quetzals per pound
d. 6.25 Quetzals per pound
b
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Assume a simplified banking system subject to a 20 percent required reserve ratio. If there is an initial increase in excess reserves of $100,000, the money supply
A. increases $100,000. B. increases $500,000. C. increases $600,000. D. decreases $500,000.
Evaluate the following statement. "As long as I am still enjoying this candy I am going to keep buying and eating more of it"
What will be an ideal response?
A high inflation rate will
A) harm those who have saved while helping those who have borrowed. B) harm those who have borrowed while helping those who have saved. C) harm those who have saved and those who have borrowed. D) benefit those who have saved and those who have borrowed.
If you were to invest $10,000 for two years and the interest rates for each of those years are 4.5% and 4.65% respectively, how much interest would you earn from the end of year one until the end of year two? Assume interest compounds annually.
What will be an ideal response?