A quality men's suit in the U.S. costs $400 . The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the suit cheaper?
The real exchange rate = $400 x .60/300 = 240/300 = .80.
The real exchange rate is less than 1 . The suit is cheaper in the U.S.
You might also like to view...
Explain how the interest rate effect can increase aggregate demand
What will be an ideal response?
Suppose that this graph describes the current labor market for high school teachers:
If the wage is w*, then:
A. there will be a surplus of certified teachers. B. there will be neither a shortage nor a surplus of certified teachers. C. teachers will be underpaid. D. there will be a shortage of certified teachers.
Which statement is true?
A. Large denomination time deposits are part of M2 but not M3. B. Large denomination time deposits are part of M3 but not M2. C. Small denomination time deposits are part of M2 but not M3. D. Small denomination time deposits are part of M3 but not M2.
Most economists agree on the amount of government intervention necessary in an economy.
Answer the following statement true (T) or false (F)