00:01
So here we have a bunch of information, right? we're told that the price of wheat is 640 usd, and it's also the price of wheat is equal to 40 pesos, right? in mexico, great.
00:14
We're also told that the nominal exchange rate is 10 pesos per dollar, right? so you can think of this as saying 10 pesos is equal to one usd, right? that's the exchange rate.
00:26
Then the real exchange rate from the united states perspective is 1 .4.
00:30
Well, how do we get this number, right? the real exchange rate is equal to the nominal exchange rate, adjusted for prices in the two countries, right? and in here, we can get this as if we are very careful with the units, the exchange rate is 10 pesos per one u .s.
00:52
Dollar.
00:53
The price at home is, sorry, 40, oh, sorry, no, it's on the united states.
01:04
Price goes on top 6 .4 u .s .d per u .s.
01:10
Wheat and on the bottom we have 40 pesos for mexican wheat...