The real exchange rate between U.S. dollars and the Japanese yens is the price of U.S. goods relative to the price of Japanese goods denominated in the U.S. dollar. If it is below one,the same basket of goods is ________ in the United States than in Japan,and the purchasing power of the U.S. dollars is ________ than the Japanese yens.

Question

Quizplus · Accepted Answer

When the real exchange rate is below one, it means that prices of Japanese goods denominated in U.S. dollars are lower than prices of U.S. goods denominated in U.S. dollars. This indicates that the same basket of goods is cheaper in Japan than in the United States. Therefore, the purchasing power of the U.S. dollars is lower than the Japanese yens.

The Real Exchange Rate Between U