Reference no: EM131999776

Real exchange rate= nominal exchange rate * (domestic price/ foreign price)

One Australian dollar buys 0.67 Euros on foreign exchange markets (the nominal exchange rate is 0.67). If a standardised basket of goods and services costs 100 Euros in Germany and 200 Australian dollars in Australia. (Treat Australia as the domestic country)

1. The current real exchange rate is ()
2. In real terms, relative to German goods and services, Australian goods and services are ()  expensive (insert either more, less or equally).
3. If, alternatively, purchasing power parity held between Australia and Germany then the real exchange rate would be ()