Question

Microeconomics

Posted 4 months ago

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Flora is traveling from Argentina to Russia to watch the World Cup. The currency of Argentina is the peso, the currency of Russia is the ruble, and the exchange rate is 1 peso equals 2 rubles.
Which of the following can be concluded based on this exchange rate?
Choose 1 answer:
(A) The ruble has depreciated
(B) The exchange rate of the peso is 1 peso per 2 rubles
(C) A ruble buys twice as many goods as a peso
(D) The ruble has appreciated
(E) The exchange rate of the ruble is 0.5 pesos per ruble
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Answer from Sia

Posted 4 months ago

Solution

a

Exchange Rate Definition: The exchange rate given is 1 peso equals 2 rubles. This means that for every 1 peso, you can get 2 rubles

b

Exchange Rate Interpretation: The exchange rate of the peso is 1 peso per 2 rubles. This directly matches option (B)

c

Currency Depreciation/Appreciation: The given exchange rate does not provide information about the historical value of the ruble or peso, so we cannot conclude if the ruble has depreciated or appreciated

d

Purchasing Power: The exchange rate alone does not indicate the purchasing power of the ruble compared to the peso. Therefore, we cannot conclude that a ruble buys twice as many goods as a peso

Answer

(B) The exchange rate of the peso is 1 peso per 2 rubles

Key Concept

Exchange Rate Interpretation

Explanation

The exchange rate provided directly states that 1 peso equals 2 rubles, which matches option (B). The other options require additional information not provided in the question.

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