In the U.S. a television costs $400 . In South Africa the same television costs 3000 rand (the currency of South Africa). The nominal exchange rate is 8 rand per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheapest?
The real exchange rate = 8 x 400/3000 = 3200/3000.
The real exchange rate is greater than 1 . The television is cheaper in South Africa.
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