What is the real exchange rate between Japan and the United States? - ProProfs Discuss

# What is the real exchange rate between Japan and the United States? Suppose the nominal exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar. Further, suppose that a pound of hamburger costs \$2 in the United States and 250 yen in Japan.┬а

1. 0.5 pound of Japanese hamburger/pound of American hamburger
B. 0.8 pound of Japanese hamburger/pound of American hamburger
C. 1.25 pounds of Japanese hamburger/pound of American hamburger
D. 2.5 pounds of Japanese hamburger/pound of American hamburger
E. None of the above

This question is part of Macroeconomics [Ch. 1
Asked by Emy_, Last updated: Apr 01, 2020

#### H. callum

Extrovert, Psyched all the time.

H. callum, Content Writer, BA, Birmingham, Albama

The correct answer to this question is B.

0.8 pound of Japanese hamburger equals one pound of American hamburger. If the nominal exchange rate between the Japanese yen and the U.S. dollar is 100 yen per dollar, and a pound of hamburger costs \$2 in the United States and 250 yen in Japan, then it should be assumed that a pound of hamburger should cost 200 Japanes yen.

However, this is not the case, a pound of hamburger costs 250 Japanese yen, which is equivalent to \$2.50. \$2.50 per pound divided by \$2 per pound equals 0.8. Therefore, 0.8 pound of Japanese hamburger equal one pound of American hamburger.

How do you work it out? because i am still a bit puzzled.

John Smith