Question: Domestically, a base unit iPhone costs 67,990 PHP and costs 999 USD. Assume a nominal exchange rate of 1 USD = 56 PHP Solve for

Domestically, a base unit iPhone costs 67,990 PHP and costs 999 USD. Assume a nominal exchange rate of 1 USD = 56 PHP Solve for e: e= 1/56=0.01785714286=0.018 Then, solve for: = e *(P P*)=(0.018)(67990999) = (0.018)(68.05805806) = 1.225045045 or 1.23 Since the real exchange rate () is high, a base unit of iPhone is relatively more expensive to buy here in the Philippines.

On the other hand, it is cheaper to buy the product in the US.

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Answer Calculations Exchange Rate e 1 USD 56 PHP Therefore e nominal exchange rate 1 56 PHPUSD 00178... View full answer

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