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My name is Ann [436]
3 years ago
8

The nominal exchange rate is .80 euros per dollar and the real exchange rate is 4/3. Which of the following prices for a particu

lar good are consistent with these exchange rates
A. $4 in the U.S. and 3 euros in Italy

B. $4 in the U.S. and 3.75 euros in Italy

C. $5 in the U.S. and 3 euros in Italy

D. $6 in the U.S. and 2.5 euros in Italy
Business
1 answer:
Svetach [21]3 years ago
4 0

Answer:

option (C) $5 in the U.S. and 3 euros in Italy

Explanation:

Data provided in the question:

Nominal exchange rate, E = 0.80 euros per dollar

Real exchange rate = \frac{4}{3}

Now,

Real exchange rate = [ Price of good in US ] ÷ [ Price of Good in Italy ]

= \frac{EPU}{PI}

Here,

PU = Price of US in dollars

PI = Price of Italy in Euros

Thus,

Real exchange in rate

\frac{4}{3} = \frac{0.8PU}{PI}

or

\frac{PU}{PI} = \frac{5}{3}

hence,

we get

Ratio of Price of a good in US to Price of a Good in Italy = \frac{5}{3}

or

we can say $5 in the U.S. and 3 euros in Italy

option (C) $5 in the U.S. and 3 euros in Italy

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Answer:

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Explanation:

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Let plug in the formula

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2 years ago
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Answer:

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