uppose the real exchange rate is 2, a litre of gasoline costs $0.50 U.S. in the US, and a litre of Canadian gas costs $1.20 Canadian. What is the nominal exchange rate? Hint: with a real exchange rate of 2, the Law of One Price does not hold.

Select one:

0.83 U.S. dollars per Canadian dollar

1.20 U.S. dollars per Canadian dollar

0.21 U.S. dollars per Canadian dollar

0.42 U.S. dollars per Canadian dollar