In Ireland,a pint of beer costs 4 Irish punts.In Australia,a pint of beer costs 6 Australian dollars.If the exchange rate is 0.8 punts per Australian dollar,what is the real exchange rate?
A) 0.53 pints of Irish beer per pint of Australian beer
B) 0.8 pints of Irish beer per pint of Australian beer
C) 1.11 pints of Irish beer per pint of Australian beer
D) 1.25 pints of Irish beer per pint of Australian beer

Question

Quizplus · Accepted Answer

The real exchange rate is the price of one good in terms of another good. In this case, the real exchange rate is the price of a pint of Irish beer in terms of a pint of Australian beer.To calculate the real exchange rate, we need to divide the price of a pint of Irish beer by the price of a pint of Australian beer.In Ireland, a pint of beer costs 4 Irish punts. In Australia, a pint of beer costs 6 Australian dollars. The exchange rate is 0.8 punts per Australian dollar.So, the real exchange rate is:4 Irish punts / 6 Australian dollars * 0.8 punts per Australian dollar = 0.53 pints of Irish beer per pint of Australian beerTherefore, the correct answer is A.

In Ireland,a Pint of Beer Costs 4 Irish Punts