Explain the phenomenon of currency devaluation. Assume that initially the US$1 = BR Real 4. What is the new price of the following products in BR Real if exchange rate changes to US$1 = BR Real 3.5?
1. An Ipad for US$250
2. An airline ticket to Brazil for US$900
3. A Brazilian barbecued dinner for US$30
Who would benefit more from the above exchange rate change – an American tourist in Brazil or a Brazilian tourist in the USA? Why?

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If US1 BR real 4 is devalued to US1 BR Real 35 the purchasing power of US has ... View the full answer