Question

A British-made automobile is priced at £20,000 (20,000 British pounds). A comparable U.S.-made car costs $27,200. One pound trades for $1.50 in the foreign exchange market. Find the real exchange rate from the perspective of the United States and from the perspective of Great Britain. Which country’s cars are more competitively priced? Instructions: Enter your responses rounded to three decimal places. Real exchange rate from the U.S perspective: . Real exchange rate from the British perspective: . Cars are more competitively priced in .

Answer 1

Answer:

The overview of the given situation is described in the explanation section below.

Explanation:

(1)...

The actual exchange rate from either the viewpoint of U.S:

= 0.867

Working:

As per the British automobiles cost will be:

=  £20,000 x $1.50/£ or $30,000

And the US car's cost compares to either the Uk car will be:

= $\frac{26,000}{30,000}$

= $0.867$

It demonstrates that the US car seems to be cheaper or affordable.

(2)...

From either the Uk view the actual exchange rate will be:

= 1.154  

Working:  

US automobile worth in pounds is equivalent to,

= $\frac{26,000}{1.50}$

= £17,333.  

The Uk vehicle's price compared to the US car currently amounts to,

= $\frac{20,000}{17,333}$

= $1.154$

(3)...

Cars or Automobiles are competitively priced in the US.

Explanation:

British vehicle exceeds,

= $\frac{20,000}{17,333}$

= $1.154$ compared to the U.S car.

It also means that perhaps the British car is much more costly, and as such the U.S. car becomes valued more highly competitive.