When referring to a currency as strong or weak, economists typically use which of the following indicators?

Question

Quizplus · Accepted Answer

The real exchange rate compares the relative price of domestic and foreign goods, taking into account inflation rates. A real exchange rate above 1 or that is rising indicates that the domestic currency is strong because it can purchase more foreign goods for a given amount of domestic currency. Conversely, a real exchange rate below 1 or falling suggests a weaker domestic currency, as it buys fewer foreign goods.

When Referring to a Currency as Strong or Weak, Economists