The best measure of the purchasing power of one currency relative to another is:

Question

Quizplus · Accepted Answer

The real exchange rate takes into account the inflation rates of both currencies, providing a more accurate measure of the purchasing power of one currency relative to another. The nominal exchange rate only reflects the relative value of currencies in the foreign exchange market, while the nominal interest rate and real interest rate relate to borrowing and lending rather than purchasing power.

The Best Measure of the Purchasing Power of One Currency