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Exchange Rates: Nominal and Real

23. Exchange Rates / Exchange Rates: Nominal and Real / Problem 4

Problem 4

Given a nominal exchange rate of 0.9 GBP/USD, a price level of \$5 for a US product, and £4 for the same product in the UK, what is the real exchange rate?

A

1.125

B

0.8

C

1.2

D

0.75