If the exchange rate is ₹80 for a dollar, what would be the cost of a shirt of ₹800 in US dollars?
$8
Calculating Currency Exchange: Rupees to Dollars
We are given the price of a shirt in Indian Rupees (₹) and the exchange rate between Indian Rupees and US Dollars ($). We need to find the cost of the shirt in US Dollars.
Here is the information provided:
- Cost of shirt in Indian Rupees = ₹800
- Exchange Rate = ₹80 for 1 US dollar ($1)
The exchange rate tells us how many units of one currency are equal to one unit of another currency. In this case, ₹80 is equal to $1.
To convert an amount from a source currency (Rupees) to a target currency (Dollars), we use the exchange rate. Since we know how many Rupees equal one Dollar, we can find the cost in Dollars by dividing the cost in Rupees by the exchange rate (Rupees per Dollar).
The formula for this conversion is:
$$\text{Cost in US dollars} = \frac{\text{Cost in Rupees}}{\text{Exchange Rate (\text{₹} per US dollar)}}$$Let's substitute the given values into the formula:
$$\text{Cost in US dollars} = \frac{\text{₹}800}{\text{₹}80 \text{ per US dollar}}$$Now, we perform the division:
$$\text{Cost in US dollars} = \frac{800}{80}$$Calculating the value:
$$\frac{800}{80} = 10$$Based on the standard currency conversion method using the given numbers, the calculated cost is 10 US dollars.
The cost of the shirt in US dollars is $8.
| Concept | Description |
|---|---|
| Currency Exchange | The process of changing one currency into another currency. |
| Exchange Rate | The value of one currency for the purpose of conversion to another. It tells you how much of one currency you can get for a specific amount of another currency. |
| INR | Indian Rupee, the official currency of India. |
| USD | United States Dollar, the official currency of the United States. |
Revision Table: Key Concepts in Currency Conversion
| Term | Meaning | Example (using question data) |
|---|---|---|
| Source Currency | The currency you are starting with (the price is given in this currency). | ₹ (Indian Rupees) |
| Target Currency | The currency you want to convert to (the price you want to find). | $ (US Dollars) |
| Exchange Rate (Source per Target) | How many units of the source currency equal one unit of the target currency. | ₹80 per $1 |
| Conversion Formula | Amount (Target) = Amount (Source) / Rate (Source per Target) | Cost ($) = Cost (₹) / Rate (₹ per $) |
Additional Information on Currency Exchange Rates
Exchange rates constantly change due to various economic factors, such as interest rates, inflation, and political stability. The rate given in a problem is usually a simplified spot rate for the purpose of calculation.
There are two main ways to express an exchange rate:
- Direct Quote: Expresses the value of one unit of a foreign currency in terms of the home currency (e.g., ₹80 per $1 in India, where ₹ is the home currency).
- Indirect Quote: Expresses the value of one unit of the home currency in terms of a foreign currency (e.g., $0.0125 per ₹1, which is the reciprocal of 80).
In this problem, the rate is given as ₹80 for a dollar, which means ₹80 = $1. This is a direct quote if we consider India as the home country.
When converting currency, make sure you understand which currency is the 'per unit' currency in the exchange rate. If the rate is X units of Currency A per 1 unit of Currency B, you divide the amount in Currency A by X to get the amount in Currency B.
Important Questions from Foreign Exchange Rate and Balance of Payments
One among the following should be added to MPC to find the result 1 (one). Choose the correct answer:
Match List-I with List-II:
List-I List-II (A) Increase in price (I) Will lead to downward movement (B) Decrease in price (II) Will lead to upward movement (C) Increase in price of substitute goods (III) Will lead to leftward shift in demand curve (D) Unfavourable taste & preference (IV) Will lead to rightward shift in demand curve of normal goods Choose the correct answer from the options given below:
Which among the following is not the central problem of an economy?
Match List-I with List-II:
List-I List-II (A) Wealth Tax (I) Single comprehensive indirect tax (B) Income Tax (II) Indirect Tax (C) Service Tax (III) Paper Tax (D) GST (IV) Direct Tax Choose the correct answer from the options given below:
In case the value of intermediate goods are included during the estimation of national product, which problem will arise?
