Which of the following best defines the real exchange rate?
A) The price of foreign currency in terms of domestic currency.
B) The price of domestic goods in terms of foreign goods.
C) The price of foreign goods in terms of domestic goods.
D) The price of domestic currency in terms of foreign currency.
E) The price of foreign bonds in terms of domestic bonds.

Question

Quizplus · Accepted Answer

The real exchange rate measures the relative price of domestic goods in terms of foreign goods, reflecting the purchasing power of a currency in terms of another currency's goods.

Which of the Following Best Defines the Real Exchange Rate