Calculate real exchange rate if the domestic price level is 100, the price level in the US is 500, and the nominal exchange rate is 70 dollars per rupee.

$\frac{1}{14}$

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$14$

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$350$

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$470$

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Solution

The correct option is
Real exchange rate is $\frac{e P_{f}}{P}$ . = $\frac{500}{100 * 70}$ = $\frac{1}{14}$

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Calculate real exchange rate if the domestic price level is 100, the price level in the US is 500, and the nominal exchange rate is 70 dollars per rupee.

The correct option is Real exchange rate is ePfP. = 500100∗70= 114

The correct option is
Real exchange rate is $\frac{e P_{f}}{P}$ . = $\frac{500}{100 * 70}$ = $\frac{1}{14}$