The ratio of the dollar price of a toy in the United States to the dollar price of the same toy in China represents the ________ between the two currencies.

Question

Quizplus · Accepted Answer

The real exchange rate compares the relative price of goods between two countries, taking into account the prices of goods in both countries and the nominal exchange rate. In this case, comparing the price of the same toy in the United States and China in dollar terms involves adjusting for price levels, which is what the real exchange rate does.

The Ratio of the Dollar Price of a Toy in the United