The real exchange rate is the amount of an overseas currency that can be purchased with the local (domestic)currency.

Question

Quizplus · Accepted Answer

The real exchange rate adjusts the nominal exchange rate by the relative prices of a basket of goods in the two countries, reflecting the purchasing power of the two currencies rather than just the amount of foreign currency that can be exchanged for a unit of domestic currency.

The Real Exchange Rate Is the Amount of an Overseas