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Suppose 4.7 Chinese yuan (¥) trade for one (1) Australian dollar ($), the Australian price level equals $0.9 per good, and the Chinese price level equals ¥2.35 per good.What is the real exchange rate in Chinese goods per Australian good, rounded to two decimal points?a.1.80b.0.90c.1.11d.0.56

Question

Suppose 4.7 Chinese yuan (¥) trade for one (1) Australian dollar (),theAustralianpricelevelequals), the Australian price level equals 0.9 per good, and the Chinese price level equals ¥2.35 per good.What is the real exchange rate in Chinese goods per Australian good, rounded to two decimal points?a.1.80b.0.90c.1.11d.0.56

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Solution

The real exchange rate is calculated by the formula: (nominal exchange rate * domestic price) / foreign price.

Here, the nominal exchange rate is 4.7 Chinese yuan per Australian dollar, the domestic price (Chinese price level) is ¥2.35 per good, and the foreign price (Australian price level) is $0.9 per good.

So, the real exchange rate = (4.7 * 2.35) / 0.9 = 11.045 / 0.9 = 12.27 Chinese goods per Australian good.

However, none of the options provided match this calculation. Please check the values or options again.

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