Calculate the Relative Price of a Basket of Goods Sold

question 132

Multiple Choice

Calculate the relative price of a basket of goods sold in the United States and Japan in terms of dollars if the yen/$ exchange rate = 90. The basket costs $100 in the United States and ¥9,000 in Japan. The relative price is:

• A) 0.9, which means the U.S. basket costs more.
• B) 1.1010, which means the Japanese basket costs more.
• C) 0.9, which means the Japanese basket costs more.
• D) 1.0, which means they both cost the same.

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