Suppose That a Bushel of Wheat Costs $5 in Canada

question 43

Multiple Choice

Suppose that a bushel of wheat costs $5 in Canada and costs 50 pesos in Mexico.If the nominal exchange rate is 30 pesos per dollar,what is the real exchange rate?

• A) 1 / 3
• B) 1
• C) 3
• D) 10

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Definitions:

Overconfidence

The belief that your abilities are better than they really are.

Underestimating

Underestimating refers to the act of evaluating something as less powerful, important, or serious than it actually is, which can lead to miscalculations in finance and planning.

Anchoring And Adjustment

A cognitive heuristic where individuals rely too heavily on an initial piece of information (anchor) when making decisions, adjusting insufficiently from that anchor.

Frame Dependence

The tendency of individuals to make different (and potentially inconsistent) decisions depending on how a question or problem is framed.