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Chapter 15: Problem 3

If the exchange rate is 1 dolar \(=£ 0.6612\) (pounds) and the price of a U.S. good is \(\$ 764,\) what is the equivalent pound price?

Short Answer

Expert verified
The equivalent pound price for the U.S good is approximately £505.08

Step by step solution

01

Understanding the exchange rate

The exchange rate between two currencies (in this case dollars to pounds) simply tells us how much of one currency we can get for one unit of the other. In this scenario, the rate is 1 dollar = £0.6612.
02

Applying the exchange rate to the price of the good

Given the price of the U.S. good is $764, the equivalent pound price is simply the product of the price of the good in dollars and the exchange rate. This can be calculated through multiplication: £0.6612 * $764.
03

Calculation

Multiply 764 dollars by exchange rate £0.6612 per dollar to get the pound price: £0.6612/dollar * 764 dollars = £505.08 (rounded to two decimal places). The value of dollars cancels out in the equation, yielding a result in pounds.

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