In France a loaf of bread costs 3 euros.In Great Britain a loaf of bread costs 4 pounds.If the exchange rate is .9 pounds per euro,what is the real exchange rate?
A)4/2.7 loaves of British bread per loaf of French bread
B)3.6/3 loaves of British bread per loaf of French bread
C)3/3.6 loaves of British bread per loaf of French bread
D)2.7/4 loaves of British bread per loaf of French bread

Question

Quizplus · Accepted Answer

To find the real exchange rate, we need to divide the price of the French bread by the exchange rate to get the price in pounds. Therefore, 3 euros / 0.9 pounds per euro = 3.33 pounds per loaf of French bread. Now we can compare this to the price of British bread, which is 4 pounds per loaf. Therefore, the ratio of British bread to French bread is 4/3.33 ≈ 1.2. To get the number of loaves of British bread per loaf of French bread, we take the reciprocal: approximately 0.83. Simplifying this gives us 2.7/4, which is the same as D.

In France a Loaf of Bread Costs 3 Euros