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)

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 8PA

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