Question

Florin and Guilder are two countries separated by a narrow sea. They use currencies called, respectively, the Flop and the Gulp.

a. The nominal exchange rate is 0.2 Flops to one Gulp.

If a trader wanted to exchange 50 Gulps for Flops, how many Flops would she get?

b. Suppose a trader turns in 40 Gulps, and gets 200 Flops.

What is the nominal exchange rate?

c. Suppose the nominal exchange rate is 0.5 Flops/Gulp.

A Guilderian trader wants to buy a barrel of Florish turnips for 15 Flops.

How many Gulps must he convert to get that many Flops?

Answer 1

a ) Ans: 10 Flops

Explanation:

1 Gulp = 0.2 Flops

50 Gulp = 0.2 * 50 = 10 Flops

b ) Ans: The nominal exchange rate is 5 Flops to 1 Gulp

Explanation:

40 Gulps are required to get 200 Flops

So 1 Gulp = 200 / 40 = 5 Flops

Hence , the nominal exchange rate is 5 Flops to 1 Gulp

c ) Ans: He must convert 30 Gulp to get that many Flops.

Explanation:

The nominal exchange rate is 0.5 Flops/Gulp.

A Guilderian trader wants to buy a barrel of Florish turnips for 15 Flops. Now he has to pay;

0.5 Flops = 1 Gulp

15 Flops = 15 / 0.5 = 30 Gulp