Suppose the Real Exchange Rate Is 1/2 Gallon of Canadian

Multiple Choice

Suppose the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $5.00 U.S., and a gallon of Canadian gas costs 8 Canadian dollars. What is the nominal exchange rate?

A) .80 Canadian dollars per U.S. dollar
B) 1.25 Canadian dollars per U.S. dollar
C) 1.60 Canadian dollars per U.S. dollar
D) None of the above is correct.