A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil? Show your work
The real exchange rate 6/5 = $120 x 2 reais per dollar/the price of boots in Brazil.
So, the price of boots in Brazil = 5 x 240 reais/6 = 200 reais.
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Exhibit 4-2 Supply and demand curves
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