To Determine the Real Exchange Rate, One Needs to Know

question 408

Multiple Choice

To determine the real exchange rate, one needs to know:

• A)the nominal exchange rate and the aggregate price level in both countries.
• B)the amount of exports and imports.
• C)the balance of payments.
• D)the purchasing power parity.

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Definitions:

Fixed Cost

Expenses that do not change with the level of output production, such as rent, salaries, or equipment leases.

Output

The quantity of a product or service produced within a given period by a company, sector, or economy.

Long-Run Average Total Cost Curve

A graphical representation showing how the average total cost of production varies with output level in the long run, when all inputs are variable.

Short Run

A period in economics during which at least one factor of production is fixed, limiting the ability to fully adjust to new market conditions.