if a u.s. dollar purchases 4 argentinean pesos, and a gallon of milk costs $3 in the u.s. and 6 pesos in…

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?\n\na) 2 gallons of argentinean milk/3 gallon of u.s. milk\nb) 2 gallons of argentinean milk/1 gallon of u.s. milk\nc) 3 gallons of argentinean milk/2 gallon of u.s. milk\nd) 1 gallons of argentinean milk/2 gallon of u.s. milk\n\nquestion 37 (mandatory) (1 point) saved\n\nif the real exchange rate for coal is 1.5, the price of coal in the united states is $50 per ton, and the price of coal in britain is 20 british pounds per ton, what is the nominal exchange rate?\n\na) 4/15 or 2.67 pounds per dollar\nb) 15/4 or 3.75 pounds per dollar\nc) 5/3 or 1.67 pounds per dollar\nd) 3/5 or 0.6 pounds per dollar

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?\n\na) 2 gallons of argentinean milk/3 gallon of u.s. milk\nb) 2 gallons of argentinean milk/1 gallon of u.s. milk\nc) 3 gallons of argentinean milk/2 gallon of u.s. milk\nd) 1 gallons of argentinean milk/2 gallon of u.s. milk\n\nquestion 37 (mandatory) (1 point) saved\n\nif the real exchange rate for coal is 1.5, the price of coal in the united states is $50 per ton, and the price of coal in britain is 20 british pounds per ton, what is the nominal exchange rate?\n\na) 4/15 or 2.67 pounds per dollar\nb) 15/4 or 3.75 pounds per dollar\nc) 5/3 or 1.67 pounds per dollar\nd) 3/5 or 0.6 pounds per dollar

Answer

Explanation:

Step1: Recall real - exchange rate formula for milk

The formula for the real exchange rate ($q$) is $q=\frac{e\times P_f}{P_d}$, where $e$ is the nominal exchange rate, $P_f$ is the foreign price, and $P_d$ is the domestic price. Here, $e = 4$ (pesos per dollar), $P_f=6$ (pesos per gallon of Argentine milk), and $P_d = 3$ (dollars per gallon of U.S. milk).

Step2: Calculate real exchange rate for milk

$q=\frac{4\times6}{3}=\frac{24}{3}=8$ pesos - worth of Argentine milk per dollar - worth of U.S. milk. Since 6 pesos buy 1 gallon of Argentine milk, 8 pesos buy $\frac{8}{6}=\frac{4}{3}$ gallons of Argentine milk per dollar - worth of U.S. milk. And since 3 dollars buy 1 gallon of U.S. milk, the real exchange rate is $\frac{\frac{4}{3}}{1}\times3 = 2$ gallons of Argentine milk per 1 gallon of U.S. milk.

Step3: Recall real - exchange rate formula for coal

The real - exchange rate formula is $q=\frac{e\times P_f}{P_d}$, where $q = 1.5$ (real exchange rate for coal), $P_d=50$ (price of coal in the U.S. in dollars per ton), and $P_f = 20$ (price of coal in Britain in pounds per ton). We need to solve for $e$ (nominal exchange rate in pounds per dollar).

Step4: Rearrange formula and calculate nominal exchange rate for coal

From $q=\frac{e\times P_f}{P_d}$, we can solve for $e$: $e=\frac{q\times P_d}{P_f}$. Substitute $q = 1.5$, $P_d=50$, and $P_f = 20$ into the formula. $e=\frac{1.5\times50}{20}=\frac{75}{20}=\frac{15}{4}=3.75$ pounds per dollar.

Answer:

Question 36: B. 2 gallons of Argentinean milk/1 gallon of U.S. milk Question 37: B. 15/4 or 3.75 pounds per dollar