A nominal exchange rate A) takes the price level of both countries into account. B) is equal to e_r × [P_d/P_f]. C) is the price of one country's currency for another's. D) is usually the same as the real exchange rate.

Question

Quizplus · Accepted Answer

A nominal exchange rate is defined as the price of one country's currency in terms of another country's currency. It does not take into account the price level of both countries or any other factors, which is why it may differ from the real exchange rate. Option B is a formula used to calculate the nominal exchange rate, but it is not a definition of the nominal exchange rate itself. Option D is incorrect because the nominal exchange rate is usually different from the real exchange rate, which takes into consideration inflation and other factors.

A Nominal Exchange Rate