question 37 (mandatory) (1 point) saved listen if the real exchange rate for coal is 1.5, the price of coal…

question 37 (mandatory) (1 point) saved listen if 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? a) 4/15 or 2.67 pounds per dollar b) 15/4 or 3.75 pounds per dollar c) 5/3 or 1.67 pounds per dollar d) 3/5 or 0.6 pounds per dollar

question 37 (mandatory) (1 point) saved listen if 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? a) 4/15 or 2.67 pounds per dollar b) 15/4 or 3.75 pounds per dollar c) 5/3 or 1.67 pounds per dollar d) 3/5 or 0.6 pounds per dollar

Answer

Explanation:

Step1: Recall real - exchange rate formula

The formula for the real exchange rate ($\epsilon$) is $\epsilon=\frac{e\times P}{P^{}}$, where $e$ is the nominal exchange rate, $P$ is the price of the good in the domestic country, and $P^{}$ is the price of the good in the foreign country. In this case, the domestic country is the United States, $P = 50$ (price of coal in the US in dollars per ton), $P^{*}=20$ (price of coal in Britain in pounds per ton), and $\epsilon = 1.5$.

Step2: Rearrange the formula to solve for $e$

Starting from $\epsilon=\frac{e\times P}{P^{}}$, we can solve for $e$ by cross - multiplying and then isolating $e$. We get $e=\frac{\epsilon\times P^{}}{P}$.

Step3: Substitute the given values

Substitute $\epsilon = 1.5$, $P = 50$, and $P^{*}=20$ into the formula for $e$. So $e=\frac{1.5\times20}{50}=\frac{30}{50}=\frac{3}{5}= 0.6$ pounds per dollar.

Answer:

d) 3/5 or 0.6 pounds per dollar