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Sagot :
The price of a banana in Guatemala 2 quetzals per pound
E= e×(P/P*)
e=nominal exchange rate
E=real exchange rate
P=domestic price
P*=foreign price
1.25=5×(0.5/P*)
P*=2.5/1.25=2
On 13th July 2022, 1 US dollar equals 7.75Guatemalan Quetzal
The price of one currency relative to another is known as the exchange rate. When nations employ gold or another accepted standard, and each currency is worth a particular amount of the metal or other standard, the exchange rate is "fixed."
When supply and demand or speculation determine exchange rates, the exchange rate is "floating" (conversion units). When a nation imports a lot of products, the demand will drive up the country's exchange rate, increasing the cost of the imported products for domestic consumers. Demand declines when the price of the items rise, and the currency of that nation becomes less expensive in comparison to the currencies of other nations. Then the price of the country's goods drops to foreign consumers, demand rises, and exports grow.
Learn more about Exchange rates here
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