Consider a basket of consumer goods that costs $90 in the United States. The same basket of goods costs CNY 105 in China. Holding constant the cost of the basket in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table. Cost of Basket in U.S. Cost of Basket in China (Dollars) (Yuan) 90 105 105 90 Nominal Exchange Rate (Yuan per dollar) 7.00 10.50 Real Exchange Rate (Baskets of Chinese goods per basket of U.S. goods)

Consider a basket of consumer goods that costs $90 in the United States. The same basket of goods costs CNY 105 in China. Holding constant the cost of the basket in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table. Cost of Basket in U.S. Cost of Basket in China (Dollars) (Yuan) 90 105 105 90 Nominal Exchange Rate (Yuan per dollar) 7.00 10.50 Real Exchange Rate (Baskets of Chinese goods per basket of U.S. goods)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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