The real exchange rate is the:
A) value of goods in one nation relative to the value of a similar set of goods in another country.
B) rate at which people exchange goods and services in a domestic market.
C) rate at which firms in different nations would be willing to exchange goods.
D) value of goods in one nation relative to the value of the same set of goods in another country.

Question

Quizplus · Accepted Answer

The real exchange rate is the value of goods in one nation relative to the value of the same set of goods in another country. This takes into account factors such as inflation, differences in labor costs, and other non-market factors. A is incorrect because it uses "similar" instead of "same," which could lead to discrepancies. B is incorrect because it refers to a domestic market instead of international exchange. C is incorrect because it only refers to firms and not the overall exchange rate between two countries.

The Real Exchange Rate Is The