For a given domestic and foreign price level, an increase in the nominal exchange rate ________ the real exchange rate.
A)increases
B)decreases
C)may either increase or decrease
D)offsets any change in

Question

Quizplus · Accepted Answer

All else equal, an increase in the nominal exchange rate also increases the real exchange rate. This occurs because a higher nominal exchange rate indicates a stronger currency.

For a Given Domestic and Foreign Price Level, an Increase