A Pair of Jeans Cost $25 in the U

question 87

Multiple Choice

A pair of jeans cost $25 in the U.S.and 1600 dinar in Algeria.If the nominal exchange rate is 75 dinar per U.S.dollar,then the real exchange rate is

• A)more than one,so a profit could be made by buying jeans in Algeria and selling them in the U.S.
• B)more than one,so a profit could be made by buying jeans in the U.S.and selling them in Algeria.
• C)less than one,so a profit could be made by buying jeans in Algeria and selling them in the U.S.
• D)less than one,so a profit could be made by buying jeans in the U.S.and selling them in Algeria.

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Definitions:

Gold Standard

An economic arrangement where paper money in a country directly mirrors the value of gold.

World War II

A global conflict that lasted from 1939 to 1945, involving most of the world's nations and leading to significant geopolitical changes.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, beginning with the U.S. stock market crash of 1929 and leading to widespread economic hardship globally.

Gold Standard

A monetary setup where the value of a nation's currency is directly tied to the value of gold.