The domestic price of a tradable good is determined by which equation?
A) Pt = e/P*t
B) Pt = P*t/e
C) Pt = eP*t
D) Pt = e -P*t

Question

Quizplus · Accepted Answer

The domestic price of a tradable good (Pt) is determined by the equation Pt = eP*t, where e is the exchange rate and P*t is the foreign price of the good. This equation shows how the domestic price is influenced by the foreign price and the exchange rate.

The Domestic Price of a Tradable Good Is Determined by Which