In most circumstances,the nominal and real exchange rates depreciate and appreciate together.

Question

Quizplus · Accepted Answer

In general, nominal and real exchange rates tend to move together. When a country's nominal exchange rate depreciates (meaning its currency is worth less in relation to other currencies), its real exchange rate also tends to depreciate (meaning its goods and services become relatively cheaper compared to other countries). Similarly, when a country's nominal exchange rate appreciates, its real exchange rate tends to appreciate as well. However, there may be specific situations where these exchange rates move in opposite directions, particularly when there are changes in inflation rates or other economic factors affecting the exchange rate calculation.

In Most Circumstances,the Nominal and Real Exchange Rates Depreciate and Appreciate