If the Cost of a Typical Basket of Goods in the U.S

question 126

Multiple Choice

If the cost of a typical basket of goods in the U.S. is $100 and in Mexico it is 800 pesos, and the nominal exchange rate is 25 pesos per dollar, what is the real exchange rate?

• A) 0.33.
• B) 1.33.
• C) 1.50.
• D) 3.13.

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Definitions:

Maximum Price

The highest price that can be legally charged for a good or service.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers at those prices.

Hundredth Unit

The hundredth unit refers to the specific position or measure of something that is one hundred in a sequence or collection.

Future Price

The predicted price of a commodity, security, or currency in the future, often determined by future contracts in the marketplace.