If the nominal exchange rate between the American dollar and the Canadian dollar is 0.89 Canadian dollars per American dollar, 2.81 American dollars are required to buy a product that costs 2.5 Canadian dollars.
<h3>What do you mean by nominal exchange rate?</h3>
The nominal exchange rate refers to the number of units that a domestic currency can purchase the units of a given foreign currency.
As per the given information, 0.89 Canadian dollars per American dollar is the nominal exchange rate. Simply buy a product that costs 2.5 Canadian dollars, 2.81 American dollars are required (2.5/0.89).
Therefore, 2.81 American dollars are needed to buy a product that costs 2.5 Canadian dollars.
Learn more about the nominal exchange rate here:
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