Question

Good that cost one half dollar in the U.S. cost one euro in Germany, the real exchange rate would be computed as how many German goods per U.S. goods?

Answer 1

Real Exchange Rate computed as German goods per U.S. goods: 2

Step-by-step explanation:

Cost in the US: 0.50 dollar

Cost in Germany: 1 euro

Real Exchange Rate: German Goods / U.S. Goods

Real Exchange Rate: 1 / 0.50 = 2

The real exchange rate measures the price of foreign goods relative to the price of domestic goods.