Question

In the United States, a three-pound can of coffee costs about $5. If the exchange rate is 0.8 euros per dollar and a three-pound can of coffee in Belgium costs 7 euros. What is the real exchange rate?

Answer 1

1 euro = $1.25

Step-by-step explanation:

if 3Ib of coffee cost $5

while exchange rate is .8euro = $1

therefore 3Ib coffee in euro will be .8 * 5 = 4euros

and 3Ib coffee cost 7euros

while exchange rate is .8euro = $1

therefore 3Ib coffee in dollar will be 7 *1 / .8 = $8.75

now 7euro = $8.75

4 euros will be equal to 4 * 8.75 / 7 = $5

so if 7 euros = $8.75 and

4 euros = $5

therefore 1 euro will be 1 * 5 / 4 = $1.25