A reduction in the real exchange rate indicates that
A)foreign goods are now relatively cheaper.
B)foreign goods are now relatively more expensive.
C)domestic goods are now relatively more expensive.
D)both A and C

Question

Quizplus · Accepted Answer

A reduction in the real exchange rate makes foreign goods relatively more expensive compared to domestic goods, as it costs more of the domestic currency to purchase foreign currency and thus foreign goods.

A Reduction in the Real Exchange Rate Indicates That