Exchange Rates and International Transactions a Domestic and Foreign Prices If we know the exchange rate between two countries currencies, we can compute the price of one country s exports in terms of the other country's money Example: The dollar price of a f50 sweater with a dollar exchange rate of $1.50 per pound is(1.50 $/f)X(E50) $75 Copyright C 2003 Pearson Education, Inc Slide 13-6Copyright © 2003 Pearson Education, Inc. Slide 13-6 ▪ Domestic and Foreign Prices • If we know the exchange rate between two countries’ currencies, we can compute the price of one country’s exports in terms of the other country’s money. – Example: The dollar price of a £50 sweater with a dollar exchange rate of $1.50 per pound is (1.50 $/£) x (£50) = $75. Exchange Rates and International Transactions