In Canada, a cup of hot chocolate costs $6. In Australia, the same hot chocolate costs 6 Australian dollars. If the exchange rate is $2 Australian dollars per Canadian dollar, what is the real exchange rate?

Question

Quizplus · Accepted Answer

The real exchange rate is calculated by comparing the cost of goods in two countries. In this case, 6 Canadian dollars equals 12 Australian dollars (6 CAD * 2 AUD/CAD). Since the hot chocolate costs 6 AUD in Australia, you can buy 2 cups of Australian hot chocolate for the price of 1 cup of Canadian hot chocolate.

In Canada, a Cup of Hot Chocolate Costs $6