Question

What is the real exchange rate if the exchange rate between the U.S. dollar and the yen is​ $1 =​ ¥100, the price level in the United States is​ 90, and the price level in Japan is​ 100?

Answer 1

¥90 per dollar

Step-by-step explanation:

In order to calculate the real exchange rate between the US dollar and the Japanese Yen, we must multiply the nominal exchange rate by the domestic price level divided by the foreign price level.

In this case the domestic price level in the US is 90, and the nominal exchange rate is ¥100 per dollar, then the real exchange rate = ¥100 x (90/100) = ¥90