Suppose That the Exchange Rate Is 9 Moroccan Dirhams Per

question 115

Multiple Choice

Suppose that the exchange rate is 9 Moroccan dirhams per U.S.dollar.Also suppose that you can buy a crate of oranges for 360 dirhams in the Moroccan capital of Rabat and can buy a similar crate of oranges in Miami for $35 dollars.

• A)The real exchange rate is greater than one and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
• B)The real exchange rate is greater than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.
• C)The real exchange rate is less than one and arbitrageurs could profit by buying oranges in the United States and selling them in Morocco.
• D)The real exchange rate is less than one and arbitrageurs could profit by buying oranges in Morocco and selling them in the United States.

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Definitions:

More Elastic

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A pricing strategy where identical or similar goods or services are sold at different prices by the same provider in different markets or to different segments of consumers.