Question

A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate? Select one: a.3/4 so the good is more expensive in the U.S. b.4/3 so the good is more expensive in Mexico c.3/4 so the good is more expensive in Mexico d.4/3 so the good is more expensive in the U.S.

          A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange
rate is 10 pesos per dollar, what is the real exchange rate?
Select one:
a.3/4 so the good is more expensive in the U.S.
b.4/3 so the good is more expensive in Mexico
c.3/4 so the good is more expensive in Mexico
d.4/3 so the good is more expensive in the U.S.

A good in the U.S. costs 20. The same good costs 150 pesos in Mexico. If the nominal exchange
rate is 10 pesos per dollar, what is the real exchange rate?
Select one:
a.3/4 so the good is more expensive in the U.S.
b.4/3 so the good is more expensive in Mexico
c.3/4 so the good is more expensive in Mexico
d.4/3 so the good is more expensive in the U.S.

Added by Juan C.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Arun Bana

Step 1

The real exchange rate compares the relative price of goods between two countries, taking into account the nominal exchange rate and the domestic prices of the goods in each country. It can be calculated using the formula: Real Exchange Rate = (Price of Good in Show more…

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A good in the U.S. costs $20. The same good costs 150 pesos in Mexico. If the nominal exchange rate is 10 pesos per dollar, what is the real exchange rate? Select one: a. 3/4 so the good is more expensive in the U.S. b. 4/3 so the good is more expensive in Mexico. c. 3/4 so the good is more expensive in Mexico. d. 4/3 so the good is more expensive in the U.S.