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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter
Section
Chapter 18, Problem 3QR
Textbook Problem
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If a Japanese car costs 1,500,000 yen, a similar American car costs $30,000, and a dollar can buy 100 yen, what are the nominal and real exchange rates?

Expert Solution
To determine

Nominal exchange rate and real exchange rate.

Explanation of Solution

Since $1 buys 100 yen, the nominal exchange rate is $1, which is equal to $100 yen.

Real exchange rate can be calculated as follows:

Real exchange rate=Price of carU.SPrice of carJapan×Exchange rate(Value of yen per d

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