The nominal exchange rate (E) is defined as:
A) the number of units of foreign currency you can obtain with one unit of domestic currency.
B) the number of units of domestic goods you can obtain with one unit of foreign goods.
C) the price of domestic currency in terms of foreign currency.
D) Both A and B.
E) Both A and C.

Question

Quizplus · Accepted Answer

The nominal exchange rate is the price of domestic currency in terms of foreign currency (option C) and it is also the number of units of foreign currency you can obtain with one unit of domestic currency (option A). So, both option A and C are correct, making option E the best choice. Option B, which refers to the real exchange rate, is not relevant to the definition of the nominal exchange rate.

The Nominal Exchange Rate (E) Is Defined As