A decrease in the real exchange rate indicates that:
A) foreign goods are now relatively cheaper.
B) domestic goods are now relatively more expensive.
C) foreign goods are now relatively more expensive.
D) Both A and C.
E) Both B and C.

Question

Quizplus · Accepted Answer

A decrease in the real exchange rate means that domestic goods have become cheaper relative to foreign goods, making foreign goods relatively more expensive.

A Decrease in the Real Exchange Rate Indicates That