The "real," or inflation-adjusted, exchange rate is

Question

Quizplus · Accepted Answer

The real exchange rate takes into account the inflation rates between two countries and adjusts the nominal exchange rate accordingly. It measures how much a currency can buy in terms of goods and services in another country. Therefore, the real exchange rate is crucial to understanding the purchasing power of a currency and its competitiveness in international trade. Options A and B are incorrect as they do not relate to the definition of the real exchange rate. Option D is incorrect as the real exchange rate is important to the Canadian economy, just as it is to any other economy.

The "Real," or Inflation-Adjusted, Exchange Rate Is