In Ireland, a pint of beer costs 5 euros. In Australia, a pint of beer costs 6 Australian dollars. If the exchange rate is 0.6 euros per Australian dollar, what is the real exchange rate?
A) 0.5 pints of Irish beer per pint of Australian beer
B) 0.72 pints of Irish beer per pint of Australian beer
C) 1.39 pints of Irish beer per pint of Australian beer
D) 2 pints of Irish beer per pint of Australian beer

Question

Quizplus · Accepted Answer

To find the real exchange rate, we need to convert the price of an Australian pint of beer into euros.

1 Australian dollar is equivalent to 0.6 euros

So, a pint of beer in Australia costs:

6 Australian dollars * 0.6 euros/Australian dollar = 3.6 euros

Now we can compare the prices of a pint of beer in Ireland and Australia on the same currency basis.

Since a pint of beer in Ireland costs 5 euros and a pint of beer in Australia costs 3.6 euros, the real exchange rate is:

5 euros / 3.6 euros = 1.39

This means that you can get 1.39 pints of Irish beer for the price of 1 pint of Australian beer. Therefore, the correct answer is B.

In Ireland, a Pint of Beer Costs 5 Euros