In the U.S. a delivery van costs $30,000 . In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheaper?
The real exchange rate = 30,000 x 20 /720,000 = 600,000/720,000 = 5/6.
The real exchange rate is less than 1 . The television is cheaper in the U.S.
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