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A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is
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A Starbucks Grande Latte costs $3.75 in the U.S. and 28 yuan in China. The nominal exchange rate is 6.75 yuan per dollar. The real exchange rate is

User Thomi
by
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1 Answer

2 votes

Answer:

Real exchange rate will be 0.9040 yuan

Step-by-step explanation:

We have given nominal exchange rate = 6.75 yuan per dollar

Domestic price = $3.75

And foreign price = $28

We have to fond the real exchange rate

Real exchange rate is given by

Real exchange rate
=nominal\ exchange\ rate* (domestic\ price)/(foreign\ price)=6.75* (3.75)/(28)=0.9040 yuan

User Michael Pakhantsov
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