In Ireland,a pint of beer costs 3 euros.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .8 euros per Australian dollar,what is the real exchange rate?
A)4/2.4 pints of Irish beer per pint of Australian beer
B)3/3.2 pint of Irish beer per pint of Australian beer
C)3.2/3 pints of Irish beer per pint of Australian beer
D)2.4/4 pints of Irish beer per pint of Australian beer

Question

Quizplus · Accepted Answer

The real exchange rate is calculated by adjusting the nominal exchange rate for the price levels. Here, 4 AUD is equivalent to 3.2 EUR (4 * 0.8). Thus, the real exchange rate is 3.2 EUR (Australian beer) / 3 EUR (Irish beer) = 3.2/3 pints of Irish beer per pint of Australian beer.

In Ireland,a Pint of Beer Costs 3 Euros