If the exchange rate between Austrian dollar and the US dollar is $0.95/A$ and prices of...
If the exchange rate between Austrian dollar and the US dollar is $0.95/A$ and prices of a common commodity in the two countries are P$= 5 and PA$ = 4.75, the Austrian dollar buys _____
Homework Answers
1 A$ = $0.95
Price in Dollars = $5
Fair price in terms of A$ = 5/0.95 = A$5.2632
Since actual price in A$ is lower, the Australian Dollar buys cheaper
i.e. price in A$ is lower
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