Which of the following variables is the key determinant in deciding whether goods are to be bought domestically or imported?

Question

Quizplus · Accepted Answer

The real exchange rate is the key determinant in deciding whether goods are to be bought domestically or imported. It takes into account the nominal exchange rate and adjusts for differences in inflation rates between countries. A higher real exchange rate makes it cheaper for domestic consumers to buy imported goods, while a lower real exchange rate makes domestic goods relatively cheaper and more attractive to consumers.

Which of the Following Variables Is the Key Determinant in Deciding