The "real",or inflation-adjusted,exchange rate,is
A)the balance of trade.
B)the budget deficit.
C)the purchasing power ratio.
D)unimportant to the U.S.economy.
E)none of the above.

Question

Quizplus · Accepted Answer

The "real" or inflation-adjusted exchange rate is the purchasing power ratio, which measures the relative value of two currencies in terms of the amount of goods and services that can be purchased. It takes into account the impact of inflation on the exchange rate, and is an important indicator for assessing the competitiveness of a country's economy. The balance of trade and budget deficit are separate economic indicators, while the real exchange rate is significant for the U.S. economy and international trade.

The "Real",or Inflation-Adjusted,exchange Rate,is