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Given that S(MYR/USD) = 4.3000, the price level of the USA is 120 and the real exchange rate Q(MYR/USD) = 5.1600, what is the price level of Malaysia?Note: Q(x/y) = S(x/y) (Py/Px).Choose the answer that is closest to your calculation.Group of answer choices1008613495

Question

Given that S(MYR/USD) = 4.3000, the price level of the USA is 120 and the real exchange rate Q(MYR/USD) = 5.1600, what is the price level of Malaysia?Note: Q(x/y) = S(x/y) (Py/Px).Choose the answer that is closest to your calculation.Group of answer choices1008613495

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Solution

To find the price level of Malaysia, we can rearrange the formula for the real exchange rate to solve for Py (the price level of Malaysia).

The formula for the real exchange rate is Q(x/y) = S(x/y) * (Py/Px).

Rearranging this to solve for Py gives us Py = Q(x/y) / S(x/y) * Px.

Substituting the given values into this formula gives us:

Py = 5.1600 / 4.3000 * 120 = 144.

So, the price level of Malaysia is closest to 144.

This problem has been solved

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