What Is the Real Exchange Rate

question 106

Multiple Choice

What is the real exchange rate?

• A) It is the ratio of the domestic cost of a foreign basket of products compared with the cost of the same domestic basket of products.
• B) It is the exchange rate minus the rate of domestic inflation.
• C) It is the exchange rate plus the rate of domestic inflation.
• D) It is the original exchange rate that was in effect when the nations were on a gold standard.

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