Question

Goods that cost 1/5 of one dollar in the U.S. cost one kroner in Denmark, the real exchange rate would be computed as how many Danish goods per U.S. goods?

Answer 1

Answer:

The amount of Kroner that can be bought from 1/5 of one dollar.

Step-by-step explanation:

We have been given that goods that cost 1/5 of one dollar in the U.S. cost one kroner in Denmark. We are asked to find the the real exchange rate that would be computed as how many Danish goods per U.S. goods.

The real exchange rate tells us how much foreign currency can be exchanged for a unit of domestic currency.

It also tells us that how much the goods and services in the domestic country can be exchanged for the goods and services in a foreign country.

Therefore, the real exchange rate would be the amount of Kroner that can be bought from 1/5 of one dollar.