Question

in canada, a cup of hot chocolate costs $6. in australia, the same hot chocolate costs 6 australian dollars. if the exchange rate is $3 australian dollars per canadian dollar, what is the real exchange rate?

Answer 1

The real exchange rate, based on the costs of a cup of hot chocolate, is 3 Australian dollars for 1 Canadian dollar, calculated by multiplying the cost in Canadian dollars by the exchange rate.

Step-by-step explanation:

The question involves calculating the real exchange rate given the cost of a cup of hot chocolate in two different countries—Canada and Australia—and the stated exchange rate. If a cup of hot chocolate costs $6 Canadian dollars and also costs 6 Australian dollars, and the exchange rate is $3 Australian dollars for every Canadian dollar, we can determine the real exchange rate. To do this, we first need to determine how many Australian dollars would be equivalent to $6 Canadian if using the stated exchange rate. We multiply 6 (the cost in Canadian dollars) by the exchange rate, which gives us 18 Australian dollars. Therefore, the real exchange rate for the hot chocolate would be 3 Australian dollars to 1 Canadian dollar, since 18 Australian dollars is equivalent to 6 Canadian dollars, as per the calculation.