If a dollar buys more rice in the China.than in the U.S. ,then
A)the real exchange rate is greater than 1;a profit might be made by buying rice in the U.S.and selling it in China.
B)the real exchange rate is greater than 1;a profit might be made by buying rice in China.and selling it in the U.S.
C)the real exchange rate is less than 1;a profit might be made by buying rice in the U.S.and selling it in China.
D)the real exchange rate is less than 1;a profit might be made by buying rice in China and selling it in the U.S.

Question

Quizplus · Accepted Answer

If a dollar buys more rice in China than in the U.S., it means that the price of rice in China is lower than in the U.S. Therefore, the real exchange rate is greater than 1. Buying rice in China and selling it in the U.S. will result in a profit due to the price difference. Thus, option B is the correct answer.

If a Dollar Buys More Rice in the China