The rate at which two currencies can be traded for each other is called the _________ exchange rate.

Question

Quizplus · Accepted Answer

The nominal exchange rate refers to the rate at which one currency can be exchanged for another. It is the most commonly used exchange rate in international trade and finance. The other options are not accurate descriptions of the exchange rate. Flexible exchange rates allow for market forces to determine the exchange rate, while fixed exchange rates are set by governments. Fundamental exchange rates are based on economic fundamentals such as interest rates and inflation, while real exchange rates adjust for inflation.

The Rate at Which Two Currencies Can Be Traded for Each