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 0.6 punts per Australian dollar, what is the real exchange rate?

Question

Quizplus · Accepted Answer

To find the real exchange rate we need to compare the prices of the same amount of beer in different currencies.

Let's convert the price of a pint of beer in Australia to Irish punts:

6 Australian dollars * 0.6 punts per Australian dollar = 3.6 punts

Now we can compare:

4 punts in Ireland vs. 3.6 punts in Australia

To find how many Australian pints we can buy for 4 Irish punts, we can divide 4 punts by the price in Australian dollars:

4 punts / (6 Australian dollars * 0.6 punts per Australian dollar) = 0.9 pints of Australian beer per pint of Irish beer

Therefore, the real exchange rate is 0.9 pints of Irish beer per pint of Australian beer, which is choice B.

In Ireland, a Pint of Beer Costs 4 Irish Punts