Let S be the USD/GBP exchange rate, P∗ be the pound cost of a consumption basket in the U.K., and P be the dollar cost of a consumption basket in the U.S. Using the units of S, P∗, and P, find the units of the real exchange rate, Q = S (P∗/P).

Macroeconomics
13th Edition
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter22: International Finance
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Let be the USD/GBP exchange rate, P be the pound cost of a consumption basket in the U.K., and be the dollar cost of a consumption basket in the U.S. Using the units of SP, and P, find the units of the real exchange rate, S (P/P).

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