If a U.S.dollar purchases 4 Argentinean pesos,and a gallon of milk costs $3 in the U.S.and 6 pesos in Argentina what is the real exchange rate?
A)2
B)3/2
C)2/3
D)1/2

Question

Quizplus · Accepted Answer

The real exchange rate is calculated as (Price of good in domestic currency / Price of good in foreign currency) * Nominal exchange rate. Here, it is (3 USD / 6 pesos) * 4 pesos/USD = 2.

If a USDollar Purchases 4 Argentinean Pesos,and a Gallon of Milk Costs